Commercial Law Office

Company law, Commercial law, Employment law, Maritime law & Litigation London [ Company Law ]  [ Commercial Law ]  [ Employment Law ]  [ Commercial Litigation ]  [ Maritime Law ]  [ Media Flash ]   [ Website Terms ]  [ Contact Us ]  Company Law New Company Law and your Commercial Business The Companies Act 2006 became law on 8 November 2006 with all parts of the Act expected to come into force by October 2008. The new law will affect UK commercial companies, their directors, shareholders, corporate structure or constitution, share capital, directors' responsibilities, shareholders rights, conduct of meetings, communications, corporate governance and legal compliance. Main changes include a statutory code of directors' duties and liabilities, provision for derivative action by shareholders against directors and third parties who have benefited from the directors default, negligence or breach of trust, company communications with shareholders and directors allotment of shares in single class companies without shareholder authority, subject to the company articles of association - see the new Companies Act 2006. The flexibility provided in the Companies Act 2006 to shareholders will be useful in cases involving shareholders' rights, interests and directors' corporate mismanagement. Shareholder Derivative Claims and Directors' Liability Under English law, the general rule is that only the company (itself a separate legal person recognised in law), and not the shareholders, can bring legal action against the parties responsible for wrongs done to the company, e.g. unauthorised withdrawal of capital from the company by a director. In practice, if the directors acted in breach of duty or in breach of trust, the majority of shareholders may vote to take legal action against the directors concerned. In the absence of a majority vote being passed, no action can be commenced against the directors. There are exceptions to the general rule and these relate to fraudulent or illegal acts by directors. For example, in cases where directors secure for themselves, benefits from a profitable contract which should have gone to the company. Other exceptions relate to the denial of an individual's shareholder's rights, the implementation of corporate decisions without the required majority votes and where the majority of shareholders commit a fraud on the minority shareholders. The rule and exceptions severely restricts the shareholders' access to remedies via the court. This has however been redressed to some degree in the Companies Act 2006 which provides procedures for a shareholder to pursue legal action in the form of a derivative action. Subject to the provisions in the Companies Act 2006, for a shareholder to bring a legal claim in the name of the company against the parties responsible for wrongs done to the company. Section 260(3) provides that a derivative claim may be brought in respect of a cause of action arising from an actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by a director of the company and that such legal action may be brought against the director or another person (or both). Any provision in the company's constitution or in a contract with the company which seeks to exempt the directors or auditors from such liability is generally void except where permitted in law. [back to top] Directors' Disclosure of Interests in Shares With effect from 6 April 2007, Directors are no longer required to disclose their interests in the shares in or debentures of their companies and associated companies, and the related obligation to keep a register of the interests disclosed by directors has been repealed. Directors' reports which are approved on or after 6 April 2007 therefore do not have to disclose the directors' interests in shares or debentures of the company and its group companies. Company Secretaries should keep the existing statutory register as a record of directors' compliance with their obligations to 6 April but there is no legal requirement for a company to update thereafter. Implementation Timetable - New Company Law The proposed implementation of the provisions in the Companies Act 2006 are as follows: 1 October 2007 - Sections 29 and 30 on resolutions and agreements affecting company constitution; Sections 116 to 119 on right of the public and company shareholders to inspect company register of shareholders; Sections 145 to 153 on the exercise of shareholders' rights including enabling provisions for nominee investment operators to request information on behalf of indirect investors from 31 December 2007; Sections 154 to 174, 178 to 181 and 188 to 259 relating to the company director appointment, validity of acts of company directors, removal of company directors, general duties of directors, transactions with directors requiring approval by shareholders, directors' service contracts, sole shareholder director, directors' liabilities; Sections 260 to 269 on derivative claims and proceedings brought by shareholders; Sections 281 to 361 relating to company resolutions, meetings and records; Section 417 on contents of directors' report; Sections 485 to 488 on appointment of company auditors; Section 993 on fraudulent trading of the company; Sections 994 to 999 on the protection of shareholders against unfair prejudice (shareholder protection); Sections 1035 to 1039 on company investigations and Sections 1121 to 1123 and 1125 to 1133 which are general provisions relating to offences under Parts 14 or 15 of the 1985 Act. Directors can take a proactive approach to management of their commercial businesses and protection of investors. If you think you need legal advice, you probably do. Contact us for advice on how the Companies Act 2006 affects you as a director or your shareholders investors. Commercial Transparency Companies must have in all company e-communications the full name of the company, company registration number, place of registration and the company registered address. If the company is authorised by the Financial Services Authority, the authorisation number should also be displayed. This assists with transparency in commercial business but also increases risks from legal liability in commercial transactions. Non-compliance could result in fines. Section 349 Companies Act 1985 as amended by Schedule 1 to the Companies (Registrar, Languages and Trading Disclosures) Regulations 2006 which came into force on 1 January 2007; passed pursuant to section 2(2) of the European Communities Act 1972 and sections 1091(4), 1105(2)(d), 1106(2) of the Companies Act 2006. [back to top] Company Dividends from Shares and Profit Extraction - Taxable? Her Majesty's Revenue & Customs has provided guidance on the application of Part 7 (Employment Income: Share Related Income and Exemptions), Chapter 4 (Post-Acquisition Benefits from Shares) of the Income Tax (Earnings and Pensions) Act 2003 - see Section 447 ITEPA 2003. This provision creates a tax charge on post-acquisition benefits derived from employment related securities including shares. For small owner managed companies which pay dividends out of company distributable profits to its director shareholders by way of profit extraction, HMRC will not apparently apply section 447 if there is no attempt at avoiding income tax or national insurance contributions on remuneration (or any attempt at avoiding IR35 rules). Dividends paid on shares of special purpose vehicles set up to pay employee bonuses, and contractors in place of income subject to PAYE and NIC to avoid the IR35 rules, may be subject to the tax charge under section 447. Need Advice on Company Law? Directors and shareholders can contact us for advice on company law, directors' rights, shareholders rights and all aspects relating to management of their commercial businesses, corporate governance and compliance. If there have been changes in your corporate commercial business or you are about to seek corporate finance or introduce investors, we can help you review and consider the adequacy and suitability of your company articles of association, shareholders agreement and directors' service agreements. [back to top] Commercial Law China - 'Template' Terms Commercial Contracts In commercial agreements with Chinese companies in China for the sale of goods, avoid the use of standard contract form of wording from similar but unrelated commercial transactions or templates with terms that may not be relevant to your business transactions. The agreement should be written in Mandarin and English text and care taken to ensure it is amended to accurately reflect the terms agreed between the parties. If the agreement provides for disputes between contracting parties to be referred to CIETAC (China International and Trade Arbitration Commission) arbitration, the place of arbitration in China (e.g. Beijing; Shanghai) and the applicable governing law should be clearly stated to avoid ambiguity. The agreement could, for example, provide for referral of disputes to CIETAC arbitration with English law or Chinese law to apply. Attention before conclusion of a binding contract could save a lot of time and costs later in the event a dispute arises and enforcement of an arbitration award becomes necessary. If you wish to have advice on the CIETAC arbitration rules, please contact us. Commercial business opportunities could present unexpected legal and commercial challenges. When in doubt, contact us to discuss your commercial requirements, whether to produce standard terms of trade, sale and purchase contracts, review tender documents, preferred supplier agreements, commercial trade letters of credit or for legal advice on the terms in commercial contracts for goods and services, before making an informed decision or signing on the dotted line. See Exporting to China for insight into commercial trading with the People's Republic of China - extract of an article published in the UK Trade & Investment Guide 2006. We can assist you with the preparation and/or review of commercial contracts, terms of business or trade, non-disclosure agreements, preferred supplier's agreement, long term supply agreements, licensing, agency and distribution of products and services agreements. Contact us for legal advice and representation of your interests in related disputes in London arbitrations and court proceedings. [back to top] FSA - Duty to Disclose Broker's Commission General Insurance Intermediaries have an obligation to disclose commission to commercial clients when asked. The purpose is to promote transparency for clients and the financial services market. The disclosure should be made in a manner which is clear, fair and not misleading. The Financial Services Authority (FSA) expects intermediaries to disclose all commission paid to affiliated companies and Appointed Representatives including any profit share arrangements. Procedures should be put in place by company Board of Directors to respond to requests for information from commercial clients and for the maintenance of proper records evidencing compliance. Some general insurance intermediaries already adopt in their terms of business the guidance issued by the London Market Brokers' Committee and the British Insurance Brokers' Association in London. They should however be aware of their obligations under FSA ICOB 4.6.1 R (applies whether or not the insurance intermediary is an agent of the commercial client):- 'Before the conclusion of a non-investment insurance contract, or at any other time, an insurance intermediary that conducts insurance mediation activities for a commercial customer must, if that commercial customer asks, promptly disclose the commission that he and any associate of his receives in connection with the non-investment insurance contract in question, in cash terms or, to the extent it cannot be indicated in cash terms, the basis for the calculation of the commission in a durable medium.' Where intermediaries such as marine insurance brokers who are remunerated by way of a commission paid by the insurer, FSA ICOB 4.6.2G applies:- 'ICOB 4.6.1 R does not replace the general law on fiduciary obligations of an agent. In relation to contracts of insurance the essence of these obligations is generally a duty on the agent to account to his principal. However, in certain circumstances, the duty is one only of disclosure. Where a commercial customer employs an insurance intermediary by way of business and does not remunerate him, and where it is usual for the insurance intermediary to be remunerated by way of commission paid by the insurer out of premium payable by the commercial customer, then if the customer asks what the insurance intermediary's remuneration is, the insurance intermediary must tell him.' Directors of authorised firms and those conducting regulated activities as appointed representatives should seek guidance from the FSA and assistance with putting in place the necessary procedures to comply with ICOB 4.6.1 R. For the relevant text on guidance, you can go to FSA Handbook ICOB Directors of general insurance intermediaries or brokers who have thus far avoided the need to apply for full FSA authorisation and regulation by acting as Introducer Appointed Representatives (IAR) for a regulated firm or FSA authorised person, should note the scope of their IAR's appointment is limited to effecting introductions (passing on details of prospective clients without engaging themselves in arrangements) and the distribution of non-real time financial promotions. An IAR is an agent of the principal authorised firm and the relationship should be governed and evidenced in the form of a written contract or agreement for practical commercial reasons (e.g. commission payments) and for management of liability risks (e.g. restricting activities outside scope of authorisation, avoiding inadvertent holding out and misrepresentation). Need Advice on Commercial Contracts? We advise on, review and prepare contracts for commercial businesses and commercial transactions such as acquisition agreements. We can assist with advice on the terms of an agency agreement to suit the commercial aims and risk management of legal liabilities of principal firms. You can contact us to discuss your specific requirements. [back to top] Employment Law Managing Risks from Valuable Assets There have been many employment law changes recently and prudent employers should review and audit their employment contracts and service agreements of the most valuable asset of a commercial business at least once a year. The legal fees are minimal compared to the potential liability from claims. The general rule is that the terms of an employment contract cannot be unilaterally varied in the absence of agreement between employer and employee. In certain circumstances, this could lead to claims for wrongful dismissal, unfair dismissal or redundancy. Employees and Human Resources Heads should note however in a recent appeal case R. Robinson v Tescom Corporation before the London Employment Appeal Tribunal Tribunal heard on 3 March 2008 where a manager's terms of employment were varied which involved more travel. The manager believed this was a unilateral variation which was a breach of his contract and he had been dismissed from his original contract of employment. He however continued to work in accordance with his original terms and under protest. A grievance was raised. He was called to a disciplinary hearing and subsequently dismissed for gross misconduct in failing to comply with the employer's legitimate and reasonable instructions. The dismissal was held to be fair by the Employment Tribunal and his appeal to the Employment Appeals Tribunal was dimissed by the Honourable Mr. Justice Elias. The fact the manager had agreed to continue working after the unilateral variation, prejudiced his case. He could not continue to work under the new terms, even under protest, and yet insists on working in accordance with the original terms of employment. By doing so, he opened himself to dismissal for gross misconduct. This case must be considered on its facts and should not be taken as authority for an employer's unilateral variation of terms of an employment contract. For a stitch in time that could save nine, contact us for the benefits from a fixed fee audit and review of your employment contracts and directors' service agreements. The Employment Rights (Increase in Limits) Order 2007 came into effect on 1 February 2008. Employers should review their contracts of employment note. For each unfairly dismissed employee, the maximum possible award for run of the mill unfair dismissal increased to £72,900 (i.e. £63,000 maximum compensatory award plus maximum statutory redundancy payment 30 x £330). A week's pay for the basic award and additional award for statutory redundancy payment and for insolvency under the government guarantee payment has been increased to £330. Outside the run of the mill, there is no statutory limit on compensation claims for unfair dimissal based on sex, race, disability discrimination or whistle blowing under the Public Interest Disclosure Act 1998. As for directors' service agreements and senior bank employees' contracts with contractual bonus provisions, the employer's exposure on risk of liability for breach of implied and express terms and wrongful dismissal claims remains as wide as the terms in the employment contracts will permit under employment law in the absence of negotiated settlement by way of a compromise agreement. Employees are valuable assets but are also part of your business risks and liabilities. Under section 230 of the Companies Act 2006, a shadow director (a person in accordance with whose directions or instructions the directors of the company are accustomed to act excluding professional advisors) will be subject to the same provisions governing directors' service contracts which means a company must keep available for inspection a copy of a shadow director's service contract or written memorandum of the terms of the service contract. The same provision also provides for notification by the company to the Registrar of the place where the memorandum is kept if it is other than at the company registered office. Non-compliance is an offence and every officer of the company in default is liable on conviction to a fine. Contact us for the preparation and/or review of directors' service agreements, employee employment contracts and your staff handbook. If there is already a potential claim, we can assist clients with settlement negotiations and advice on compromise agreements with a view to avoiding the stress, costs and publicity from a reference of a claim to the employment tribunal. If you require advice on employment law, statutory and contractual rights or if you need to consider employment law in relation to the terms of compromise agreements between employer and employee, we can assist. [back to top] Bonuses, Unfair Dismissal and Unfair Contract Terms On 17 November 2006, the Court of Appeal in London held in the case of Commerzbank AG v James Keen that Section 3 of the Unfair Contract Terms Act 1977 (liability arising under contract) does not apply to employment contracts as employees do not "deal as a consumer" with their employer. In this case, an ex-employee with a basic annual salary of £120,000 was eligible to participate in a discretionary bonus scheme. The terms stated that no bonus will be paid if on the date of payment of the bonus the employee was not employed by the Bank or if he was under notice to leave the Bank's employment. Mr. Keen was made redundant on 10 June 2005 before the Bank's bonus payment date in March 2006. Mr. Keen claimed breach of contract, under-payment and non-payment of annual discretionary bonuses under the term providing for entitlement to a discretionary bonus. It was claimed the Bank could not rely on the term (under UCTA 1977) which provided that no bonus would be paid if an employee was no longer employed by the Bank. Hence, the employer was in breach of contract and not entitled to exclude or restrict any liability in respect of the breach or to claim to be entitled to render a contractual performance substantially different from that which was reasonably expected of the employer, or in respect of the whole or any part of the employer's contractual obligation, to render no performance at all by non-payment of the bonus. If you have been unfairly dismissed and deprived of your bonus entitlement just before the date your employer was due to declare and distribute the company bonus or if you believe you were discriminated against in the distribution of bonuses, you may have a claim. To extinguish your right to bring employment related claims, a compromise agreement with terms favourable to the employer, some of which could be penalty clauses and thus unenforceable, may be offered for your acceptance. Contact us for advice on your rights and independent legal advice on the terms of your compromise agreement. Who is the Employer? On 18 May 2007, the Employment Appeal Tribunal held in the case of Consistent Group Ltd -v- Kalwak and Others and Welsh Country Foods Ltd that agency workers were employed by the employment agency regardless of the fact that it was the company where they were sent to work which exercised control over their day to day work. This case was decided on the facts surrounding the dispute and may not apply to other relationships between an employment agency and their temporary workers. [back to top] Employment Rights - Agency Worker to Employee Section 108 of the Employment Rights Act 1996 as amended by the Unfair Dismissal and Statement of Reasons for Dismissal (Variation of Qualifying Period) Order 1999 provides an employee will not be entitled to the statutory right not to be unfairly dismissed by his employer unless he or she has been continuously employed for a period of not less than one year ending with the effective date of termination of employment. Generally, employment law requires an employee to have at least one year of continuous employment before entitlement to statutory protection from unfair dismissal. There are however several exceptions on which we will be pleased to advise. If an agency worker were to work for an end-user employer (agency's client) over several periods and then taken on as an employee, would the periods worked as an agency worker count towards the one year qualifying period so as to entitle him or her to statutory protection from unfair dismissal? In the case of Wood Group Engineering (North Sea) Ltd -v- Karen A Robertson, the Employment Appeal Tribunal considered whether there was an implied contract of employment between an agency worker and the end-user employer, when the agency worker was dismissed less than one year after she was taken on as an employee by the end-user. The main legal issue was whether the periods of employment as an agency worker should count towards her one year continuous employment. In this case, there were contractual arrangements and obligations between the agency and the end-user employer and between the agency and the agency worker which governed the relationship between the parties regarding control over the agency worker and mutuality of obligations. The Employment Tribunal at first instance decided there was an implied contract of employment during the period when Ms. Robertson worked as an agency worker because the end-user employer exercised control over her work and there had been mutuality of obligation between the parties. The end-user employer appealed against the decision. On 6 July 2007, the Employment Appeal Tribunal rejected the decision of the Tribunal. It disagreed there was an implied contract of employment given the tripartite contractual agreements and held the period of continuous employment commenced only when the agency worker was taken on as a full time employee and not before. Consequently, Ms. Robertson was not entitled to statutory protection from unfair dismissal, given the facts of her case. [back to top] Time Limits for Claims The subject of time limits within which claims arising from employment can be confusing and legal advice should always be sought. One result of an out of time claim can be found below. Claims for wrongful dismissal or wrongful constructive dismissal in breach of contract under common law are treated differently from statutory claims for unfair dismissal. Different time limits for claims against an employer apply. Before 12 July 1994, wrongful dismissal claims could only be brought in Court. As a general rule, Employment Tribunals now have concurrent jurisdiction to hear wrongful dismissal claims subject to the amount of compensation they can award. There are however certain claims which must be brought in court, even if the sums claimed are within the power of the employment tribunal to award, e.g. issues relating to restrictive covenants, personal injury and intellectual property rights claims. If the amount of compensation exceeds the maximum amount the Employment Tribunal has power in law to award, the wrongful dismissal claim may be brought in court and a six year time limit for bringing claims would normally apply. If the wrongful dismissal claim is brought in the Employment Tribunal, an employee has three months from the effective date of termination of employment to bring a contractual claim and the employer will have six weeks from the date the employer received a copy of the employee's claim to counterclaim against an employee for breach of contract. The normal time limit for bringing a statutory claim for unfair dismissal is three months from the effective date of termination unless the statutory dispute resolution procedures under the Employment Act 2002 (Dispute Resolution) Regulations 2004 apply, in which case there will be an automatic three month time extension. There are exceptions and circumstances which allow an employment tribunal to extend time and these may apply to your claim. The time limits are strictly enforced by the employment tribunals and this was recently demonstrated. On 6 August 2007, the Employment Appeals Tribunal in London held in the case of Beasley -v- National Grid Electricity Transmissions that a claim for unfair dismissal presented by email just 1 minute 28 seconds outside the three month time limit and the complaint was precluded from being considered by an Employment Tribunal under Section 111(2) Employment Rights Act 1996. Paid Annual Leave Entitlement Increase There have been more changes to the Working Time Regulations 1998. Minimum annual paid leave entitlement for full time and part time employees will be increased from 20 to 24 days (pro rated for part timer workers who are entitled not to be treated unfavourably) on 1st October 2007 and is expected to be further increased from 24 to 28 days on 1st April 2009. Paid leave entitlement starts to accrue on the date of commencement of the employee's employment. The law provides for minimum annual paid leave but an employer may increase leave entitlement in its employment contracts. The annual leave entitlement includes public holidays. Businesses will need to review their employment contracts. These changes will affect calculations of payment in lieu of annual leave entitlement that has accrued but untaken on termination of an employee's employment. Payments under Company Directors' Service Agreements The prohibition on companies making payments to directors under their service contracts which are tax free or calculated by reference to income tax rates has also been repealed (Section 311 Companies Act 1985 on restrictions on directors taking financial advantage). Employment Claims and Compromise Agreements Advice? Contact us if you require advice on the validity of contractual or statutory claims under employment law or the enforceability of terms in a compromise agreement. [back to top] Commercial Litigation Civil Procedure Rules Civil Procedure Rules (CPR) are the rules and procedures which govern the conduct of commercial litigation in England. The rules are divided into Parts and each Part is supplemented and modified by Practice Directions from the courts to assist with clarification of the rules and procedures. Claimants, Defendants, Solicitors, Barristers and the Court are bound to follow the CPR in the conduct of commercial court cases. Email Evidence Civil Procedure Rules & Practice Directions on Disclosure & Inspection of Documents - In litigation, a party is obliged to disclose relevant documents to the opposition. Disclosure may be standard or otherwise as order by the Court. CPR Part 31.4 defines a document as anything in which information of any description is recorded. Civil Procedure Rules Part 31 Practice Direction 2A.1 extends disclosure to electronic documents, including e-mail and other electronic communications, word processed documents and databases. In addition to documents that are readily accessible from computer systems and other electronic devices and media, the definition covers those documents that are stored on servers and back-up systems and electronic documents that have been ‘deleted’. It also extends to additional information stored and associated with electronic documents known as email and file metadata (information on document creation date, edit date, view dates, distribution list, amended text etc. automatically added to electronic documents but normally not displayed on paper copies or screen). Clients and in-house legal counsel are reminded they are required in litigation to make a reasonable search of electronic storage systems for active, archived and deleted data, and that deleted documents can be retrieved, reconstituted and adduced as evidence in commercial court litigation. We provide guidance and representation on behalf of Claimant or Defendant clients before and after commencement of legal proceedings and can assist with the forensic IT aspect of commercial litigation. [back to top] Forcing Settlement of Commercial Claims It is always time and costs effective to avoid litigation by settling a claim for which you are liable. If the claim is excessive, you make an offer to settle an amount for which you believe you are liable. What do you do if court proceedings are issued for a claim you know to be excessive or if the claimant attempts intimidation by retaining a large firm of solicitors to act on their behalf or you find the conduct of the case is deliberately dragged out to wear you down and/or exhaust your resources? Will you be able to force settlement and bring the case to an end to minimise legal costs on both sides? Prior to 6 April 2007, Defendants wishing to make an offer to settle a claim under Civil Procedure Rules Part 36 at any time before or after court proceedings are commenced. The offer must be in writing; state it includes interest and is intended to have the costs sanction consequences of a Part 36 offer to settle; specify a period of not less than 21 days within which the Defendant will be liable for the Claimant's costs (to be assessed by the Costs Judge if not agreed) if the offer is accepted; state whether the offer refers to the whole of the claim in the statement of claim or to a part of it; whether it takes into account any counterclaim by the Defendant and funds to back the offer (a form of security for the Claimant) made must be lodged in court. If the Claimant accepts the offer, the claim is brought to an end. If the Claimant refuses to accept the offer and proceeds with litigation and is awarded an amount of the claim which is less than the sum offered by the Defendant, the Claimant will be subject to the costs consequences and must pay the Defendant's legal costs with interest from the date the offer expired. However, some Defendants encountered difficulties in complying with the requirement to make actual payment of funds into court to support their offer to settle, in circumstances where such payment may not necessarily bring an end to litigation. They were therefore deprived of a useful tool that could force early settlement. From 6 April 2007, following changes to Part 36 of the Civil Procedure Rules, the Defendant is no longer required to lodge funds into court to back the offer. This brought some balance back into commercial litigation. If the Part 36 offer is accepted by the Claimant, the Defendant has 14 days to make payment to avoid a judgement from being entered. By making a Part 36 offer of settlement, a Defendant would have gained leverage and transferred part of the risks from commercial litigation back to a Claimant, particularly one with deep financial pockets. Other changes allow Claimants to accept Part 36 offers to settle out of time without consent of the court subject to the costs consequences but there may be exceptions to this general rule as costs is always at the discretion of the court in commercial litigation. Legal Advice and Representation in Court Required? If you have a claim or have been served with legal proceedings, you can contact us for legal advice on your claim, defence or counterclaim and for assistance with legal representation in the commercial courts. [back to top] Maritime Law Security for Cargo Claim The letter of undertaking is a form of security for the claims of the cargo owners and interests given by a P&I Club (shipowners mutual protection and indemnity insurers) in return for cargo owners and interests agreeing to refrain from taking action that would prejudice the shipowners’ legal and commercial interests such as the arrest of the owners’ ships for security for the claims pending settlement or in other cases, the release from arrest of owner's ship and/or refraining from re-arresting owner's ships. Its wording is subject to contention and should be reviewed with developments in case law. Letters of undertaking can be made subject to English law and worded to accept the exclusive jurisdiction of the English High Court. In Owners of the Cargo lately laden onboard the vessel “Jutha Rajprueck” –v- Steamship Mutual Underwriting Association (Bermuda) (2003), the Admiralty Court and the Court of Appeal considered the meaning of a “competent court” in the context of an undertaking given by the P&I Club in the absence of an expressed agreement to English law and jurisdiction of the English High Court. The “Jutha Rajprueck” carried a mixed cargo of steel coils, light and heavy machinery from Japan/Korea bound for Vietnam, Thailand and Malaysia. On the way to Thailand, she suffered an engine breakdown in bad weather, could not be restarted and was abandoned but later salvaged to a Chinese port. Part of the cargo sustained damage caused by shifting and water ingress. There were 28 'bills of lading' which were governed by different jurisdictions and provided for various laws to apply including English law, Thai law and exclusive Thai jurisdiction and exclusive Hong Kong jurisdiction. Cargo interests obtained security from shipowners’ P&I Club which included in its letter of undertaking: “We further undertake that we will within 14 days of receipt of a written request from you to do so, instruct solicitors to accept on behalf of the above-named ship service of in rem proceedings brought by you in a competent court and/or tribunal as mentioned above and file an acknowledgement of service thereof, albeit wholly without prejudice to the Owner’s rights to contest jurisdiction and/or apply to stay such proceedings.” The undertaking was to be governed by and construed in accordance with English law and the Club agreed to submit to the exclusive jurisdiction of the English High Court for the purpose of any process for the enforcement of the letter of undertaking. Cargo interests subsequently issued an English court Admiralty claim in rem against the shipowner and/or demised charterers and sister ships. The Club was called upon to appoint UK solicitors to accept service of proceedings in accordance with the letter of undertaking but declined. It argued it was only obliged to instruct solicitors to accept service of proceedings brought in a competent court where such proceedings could be both commenced and pursued to a conclusion and contended the English Admiralty Court was not a competent court since it was not in a position to exercise its jurisdiction in rem because neither the Jutha Rajprueck or her sister ships had ever come into English territorial waters. Further, the bills of lading were subject to exclusive jurisdiction elsewhere. The Admiralty Judge ordered the Club to appoint solicitors to accept service of proceedings in rem and to file an acknowledgement of service. The Club appealed against the decision. The Court of Appeal rejected the Club’s contention as it made no commercial sense. It held that one of the purpose of a letter of undertaking is to give an undertaking to accept service of in rem proceedings in a competent court and this would be largely defeated if the Club was only obliged to accept service in a jurisdiction in which the vessel or a sister ship was actually present. The express reservation of the shipowner’s rights to contest jurisdiction and to apply to stay proceedings indicated that the “competent court” was not necessarily one in which the proceedings would be pursued to a conclusion. A “competent court” meant a court that has jurisdiction to entertain claims in rem proceedings and the Admiralty Court had such jurisdiction under sections 20 and 21 of the Supreme Court Act 1981. In the Court’s view, the decision by the Judge accorded well with the requirements of business efficacy and dismissed the appeal. London Arbitration or Admiralty and Commercial Court Litigation? James Chan & Co has acted for shipowners, P&I Clubs, charterers and cargo interests in arbitrations and commercial and admiralty court cases and the firm's work in the maritime and shipping fields date back to 1989. We undertake maritime and shipping law cases on behalf of UK and international clients in jurisdiction disputes, arrests of vessels, obtaining security for claims and costs, charterparty disputes, bill of lading and cargo claims and insurance claims. Contact us for advice and representation in arbitrations, admiralty and commercial court work. [back to top] Media Flash For the Media Community & Investigative Journalists Government power over the selection of Chairman of the BBC? The appointments process for BBC Chairman has been the subject of criticism from their Lordships' Select Committee - see Parliament's Press Notice dated 3 August 2007. The House of Lords Communications Committee has launched a new major enquiry into Media Ownership and the News. See the scope and structure of the enquiry and the evidence for which the Committee is seeking in the Parliament's Press Notice dated 26 June 2007. The call to the public for evidence by the House of Lords for the first part of the enquiry and guidance can be found here. The deadline for written evidence was 3 September 2007. [back to top]