28th March 2012

Ukraine-Russia gas situation

Ukrainian President Viktor Yanukovych has confirmed Ukraine’s intention to significantly reduce imports of Russian natural gas.

“We have reduced gas purchases from Russia to 27 billion cubic meters this year from 41 bcm in 2011,” Yanukovych said. “We also plan to curtail our purchases in the next few years. The only reason is that we don’t have enough money to pay for it and the price of gas is unbearable.”

Russia and Ukraine have become embroiled in a drawn-out dispute over the price and volume of Russian gas purchased by Ukraine, with Kyiv insisting the current price is too high and Moscow pushing for control of Ukraine’s system of gas transit to Europe as part of any deal to cut prices.

Ukraine, it seems, aims to purchase 106 million cubic meters from Germany in an effort to reduce its dependence on Russian natural gas. Naftogaz Ukraine is reported to be planning to sign a short-term contract with Germany’s Rheinisch-Westfälisches Elektrizitatswerk energy company to deliver spot gas bought from Europe to Ukraine via Slovakian pipelines.

The reasons behind these decisions are the same: Ukraine is not satisfied with the high price of Russia’s natural gas, which is supplied under contract which was signed in 2009 by the government of then Prime Minister Yulia Tymoshenko. It is hardly surprising that Ukrainian energy companies are not happy about that contract —Tymoshenko has been sentenced to 7 years in prison for signing it.

Time and again, Ukrainian officials have repeated that the price of Russian gas, as established by the contract signed in 2009, is destroying Ukraine’s economy. Even Russian’s latest offer of a 10 percent discount, made after Russia’s similar discount to other European customers, is not enough to allow Ukraine to keep the lights on.

Zoya Burbeza is a solicitor at Zaiwalla & Co. Solicitors, a niche London firm specializing in international commercial arbitration and litigation.

19th March 2012

Bloomberg, Ukraine, Greece and default

Recently the Bloomberg news agency reported that, for the first time in two years, the risk of Ukraine defaulting on its debts was higher than the risk of Argentina doing the same. And today Ukraine’s default risk is higher than any other country but Greece. Bloomberg notes that Ukraine is plagued by increasing budget deficit, a slowdown in economic growth, limited access to international capital markets resulted in the suspension of cooperation between Ukraine and the International Monetary Fund.

This statement by Bloomberg, indicating that Ukraine is in line after Greece, heading towards a default, resonated considerably around Ukraine and beyond.

Analysts say that talk of a possible default of Ukraine has existed throughout the 20 years of its independence, and yet such a collapse never took place. As noted by the president of the non-governmental Centre for Economic Development, Alexander Paskhaver, in the midst of the economic crisis in 2008 the risks of default by Ukraine were several times higher than now and today there are no objective parameters which indicate that Ukraine will not be able to pay off its debt in 2012. Paskhaver finds the talk of an illegal default to be illegitimate in itself, given that Bloomberg indicates only of an increasing difficult situation, not of default itself:

“This is nothing more than a signal that the situation is not easy,” says Paskhaver.

On the topic of the possibility of a default caused by Bloomberg’s report, there was an immediate response by officials in Ukraine. On February 23rd Prime Minister Mykola Azarov publicly assured the world that the Government and the National Bank of Ukraine are in full control of the financial and economic situation in the country, and urged the media not to scare people by discussing such strong words as ‘default’:

“There will not be any kind of default in Ukraine!” he said firmly.

Newly appointed vice premier of Ukraine, Valery Khoroshkovsky, a super-efficient manager and a rising star of Ukrainian politics, said that Ukraine performs all of its debt obligations with no problems. “I want to formally refute such insinuations, because in fact we now do not see problems with the repayment of external debt, even if we have not resumed our cooperation with the IMF,” he said.

He explained that the largest number of debt repayments was made in February, and Ukraine produced these payments without any problems. He noted that further payments would be required in March, and then the financial burden will be the beginning of summer, June 4, and then by October 2012. “We see all these aspects, we have enough financial resources to pay all these debts”, assured Khoroshkovsky.

So where did Bloomberg get the impression that Ukraine was ready to go the way of the Greeks?

Get up close to that issue, and you can strongly pick out the smell of gas.

Before it is willing to grant another loan to Ukraine, the IMF insisted that the domestic price of gas for Ukraine’s population should be increased to market levels, and linked the solution of the problem with the provision of credit. But the acting government of Ukraine simply cannot take such a step, for in October Ukraine will hold parliamentary elections. The ruling party’s ratings, and those of President Viktor Yanukovych, have fallen to critically low levels. An increase in the price of gas for ordinary retail customers could lead to the regime simply being swept away by angry voters. For this reason, and some others, a key issue for Ukraine is the price of Russian gas.
Due to the contract signed in 2009, Russia imposed unprecedented high gas prices for neighboring Ukraine. This price is much higher than that charged to all other European countries. It is because of the signing of this contract that the former Prime Minister Yulia Tymoshenko in October last year was sentenced to seven years in prison and is now serving her sentence.

When he came to power in 2010, “pro-Russian” Yanukovych dripped assurances about the “friendship and Slavic brotherhood,” and in Ukraine great expectations arose that Russia would reduce gas prices in return for numerous political concessions. These expectations soon turned into bitter disappointment, and the new economic confrontation which not only continues but has intensified. “Economic war” broke out, in forms such as the blocking of supplies of Ukrainian cheese to the Russian market. This conflict is exacerbated by the fact that Ukraine was defiant enough to implement a Western-oriented economic development plan, and achieved by that route a considerable success: full preparation to sign an agreement to create a large-scale free trade zone with the EU. This step of the political elite of Ukraine puts an end to Russia’s plans to return the country to its sphere of economic dominance.

So, perhaps not coincidentally, the principal distributors of Bloomberg’s message about the risk of default of Ukraine, and the comparison of Ukraine with Greece, were Russian media.

Zoya Burbeza is a solicitor at Zaiwalla & Co. Solicitors, a niche London firm specializing in international commercial arbitration and litigation.

9th March 2012

Iranian bank to challenge UK, EU sanctions; hires Zaiwalla & Co Solicitors

LONDON: Bank Mellat, the largest Iranian private bank, has decided to challenge the applicability of the sanctions imposed on it by the UK and the European Union and has appointed Zaiwalla & Co Solicitors to fight the case.

The sanctions were imposed mainly because of the alleged influence of the Iranian private sector on the country’s nuclear development activity.

Zaiwalla said in a statement that it has been appointed by the bank to represent the case. Set up solicitors of Indian origin, Zaiwalla & Co, a niche chancery lane firm with strong overseas clients, are also before the European Court of Justice and the UK Supreme Court, acting for several other Iranian institutions affected by the UK and EU sanctions.

On February 20, Mellat lodged with the UK Administrative Court the challenge to the Financial Restrictions (Iran) Order 2011. Under that legislation, UK Financial Institutions were ordered not to deal with any bank incorporated in Iran, including the Central Bank of Iran.

Bank Mellat’s challenge before the court will raise the important question of whether it is acceptable that sanctions should injure the private sector, when that sector had no role with or influence over the Iranian government’s nuclear policy.

In the case of Libya, for example, action was taken to protect Libya’s innocent private citizens from physical injuries that resulted from actions taken by their own government.

On the same principle of International Public Policy, the Court will be asked by Bank Mellat to ensure that the innocent private sector in Iran is not made to suffer financial injury as a result of the actions of the Government of Iran.

MSN News

9th March 2012

Iranian bank to challenge UK, EU sanctions; hires Zaiwalla

London, Mar 9 (PTI) Bank Mellat, the largest Iranian private bank, has decided to challenge the applicability of the sanctions imposed on it by the UK and the European Union and has appointed Zaiwalla & Co Solicitors to fight the case.
The sanctions were imposed mainly because of the alleged influence of the Iranian private sector on the country’’s nuclear development activity.
Zaiwalla said in a statement that it has been appointed by the bank to represent the case. Set up solicitors of Indian origin, Zaiwalla & Co, a niche chancery lane firm with strong overseas clients, are also before the European Court of Justice and the UK Supreme Court, acting for several other Iranian institutions affected by the UK and EU sanctions.
On February 20, Mellat lodged with the UK Administrative Court the challenge to the Financial Restrictions (Iran) Order 2011. Under that legislation, UK Financial Institutions were ordered not to deal with any bank incorporated in Iran, including the Central Bank of Iran.
Bank Mellat’’s challenge before the court will raise the important question of whether it is acceptable that sanctions should injure the private sector, when that sector had no role with or influence over the Iranian government’’s nuclear policy.
In the case of Libya, for example, action was taken to protect Libya’’s innocent private citizens from physical injuries that resulted from actions taken by their own government.
On the same principle of International Public Policy, the Court will be asked by Bank Mellat to ensure that the innocent private sector in Iran is not made to suffer financial injury as a result of the actions of the Government of Iran.

Middle East Online

9th March 2012

Bank Mellat challenges EU sanctions

Iran’s largest private bank selects Indian law firm to challenge applicability of EU sanctions imposed on it due to Iranian private sector on country’s nuclear development activity.

6th March 2012

Calling in your debts

27th January 2012

City Lawyer in Indian Award

A london-based lawyer has been recognised by India for her contriburtio to justice.

Rajiv Shukla, Indian minister of state for parliamentary affairs, presented the Glory of India award to Pavani Reddy at a function in top hotel in New Delhi last week.

Reddy heads up the litigation and international arbitration team at Zaiwalla & Co.

The solicitor was noted for her work in international arbitration and joint venture projects and is currently defending a provate Iranian bank from the EU sanctions against the country.

She has represented clients in high profile cases, including one for the Tamil Nadu Electricity Board (TNEB).

February 2012

The process explained

Pavani Reddy, of Zaiwalla & Co Solicitors, reviews the Gafta arbitration process

Arbitration is a process that provides a confidential alternative to open court for disputing parties.  There are two types:

(i)             Ad hoc arbitrations, where the tribunals are appointed by parties according to a method that they determine by themselves;

(ii)            Administered arbitrations, which are administered by a professional arbitration institution, such as the ICC, LCIA, Gafta, FOSFA etc.  Arbitration institutions have their own rules and procedures, to which parties and the tribunal are required to adhere.  The “arbitral tribunal” is the arbitrator or arbitrators sitting to determine the dispute.

The Grain and Feed Trade Association (Gafta) is a dominant international arbitration institution and is held in high respect around the world. It began life out of the 1971 merger between the London Corn Trade Association (LCTA) and the Cattle Feed Trade Association (CFTA).

The main objective of Gafta is to promote the international trade in grains, animal feeding stuffs, pulses and rice. Gafta deals with disputes involving international trade, shipping, letters of credit and FOB and CIF contracts. Today, the majority of world trade in cereals and animal feed carried out under Gafta contracts and the institution has a range of about 80 standard-form contracts, adopted by trading companies when entering into contracts. These contracts refer disputes to Gafta administered arbitrations under forms 125 and 126.

In addition to arbitration under Gafta forms 125 and 126, alternative dispute resolution services offered by Gafta include charterparty arbitration under form 127 and mediation under form 128. Gafta contracts are governed by English law and provide for England to be the venue of the arbitration. These arbitration hearings usually take place at the registered offices of Gafta in London, but can take place elsewhere so long as the parties agree to that in writing.

Legal representation

Gafta restricts the involvement of lawyers in its arbitrations.  Parties may engage lawyers to assist in drafting written submissions to the tribunal, but there is no legal representation at oral hearings unless both parties expressly agree it should be allowed, pursuant to Rule 16. Parties are however free to engage trade representatives to represent them at the hearings.

A Gafta tribunal allows costs to be awarded to a successful party for legal representation only if costs are reasonable and there has been an agreement between the parties that legal representatives should take part in the proceedings. Despite these rules, international parties often instruct lawyers to ensure all legal issues are properly considered and argued in submissions.

Gafta rule 125

A party (the claimant) can initiate the arbitration process by serving a notice of intention to refer a dispute to arbitration on the other party (the respondent), and by appointing an arbitrator.  The dispute will then be heard and determined by a tribunal of three arbitrators (in accordance with rule 3:2) unless both parties agree to appoint a sole arbitrator (in accordance with clause 3:1). One exception is that disputes that relate to “Rye Terms” must be heard by three arbitrators.

The Gafta Rules prescribe different time limits commencing arbitration in respect of disputes arising out of “Rye Terms”, CIF, CIFFO, C&F and FOB contracts. The most common time limit is that, in the case of CIF, FOB, CIFFO and C&F contracts, the arbitration must be initiated not later than one year after the expiry of the contract period of shipping.

Appointment of sole arbitrator

If a claimant desires a sole arbitrator to be appointed, they must, before the expiry of the time limit for claiming arbitration, serve a notice on the respondent seeking his agreement.  The respondent then has nine days to either agree to the appointment of a sole arbitrator by Gafta or, if they do not agree, to appoint an arbitrator to a tribunal of three arbitrators and tell the claimant that their arbitrator is so appointed.

If the respondent agrees to the appointment of a sole arbitrator, Gafta will then appoint the arbitrator on receipt of a statement of claim, supported by evidence, from the claimant. The benefits of appointing a sole arbitrator are the speed and relatively low-cost of obtaining decisions.

Three arbitrators

In this case, before the expiry of the time limit for claiming arbitration, the claimant must notify the respondent of the Gafta qualified arbitrator they have appointed. The respondent then has nine days to notify the claimant of the arbitrator they appoint to the tribunal. Both parties then prepare their first submission, and on receipt Gafta will independently appoint the third arbitrator, who will be the chairman.

If a party does not know who to appoint, then it can apply to the Gafta Secretariat, asking them to appoint an arbitrator on its behalf. Similarly, if the respondent fails to appoint an arbitrator, Gafta will appoint an arbitrator for the respondent.

The procedure

The first step sees the claimant serving a clear and concise statement of his case, with supporting evidence, to the tribunal and the respondent. The tribunal will then issue procedural directions, telling the respondent how long they have to serve their statement of defence, together with any supporting documents. The tribunal then directs that the claimant may submit further written comments and/or documents in reply to the defence.

The tribunal may however adopt procedures better suited to the particular case, to avoid unnecessary delay or expense, or to allow fair resolution of the matters in dispute.

After the appointment of the tribunal, if neither party submits any submissions or documentary evidence within one year of the date of the notice of claiming arbitration, then the claimant’s claim shall be deemed to have lapsed – unless the claim is renewed by a notice served by either party on the other or by the service of documentary evidence or submissions by either party. The claim may be renewed for successive periods of one year, but cannot survive more than six years from the date of the first notice, after which time it must lapse regardless of whether it has been decided.

Tribunal’s jurisdiction

Gafta rules allow the tribunal to rule on its own jurisdiction, meaning the tribunal can determine whether there is a valid arbitration agreement, whether the tribunal is properly constituted and which matters have been submitted to the tribunal to decide in accordance with the arbitration agreement.

If the tribunal determines that it has no jurisdiction, for example if it finds that the arbitration agreement is actually invalid, Gafta will notify the parties of the tribunal’s decision. That decision will be final and binding on the parties, subject to any right of appeal to the board of appeal, which may uphold the decision.  However if it reverses that decision then the dispute will be referred to arbitration afresh.  The time limit for the parties to appoint a new tribunal will run from the date of the board of appeal’s order.

If the first tribunal determines it does have the jurisdiction to hear the arbitration, then neither party may appeal that decision to the board of appeal.

Arbitration awards

Once parties have completed their exchange of submissions, the tribunal will then inform the parties that it will go ahead and publish an award.  If a party wants an oral hearing of the issues, it may request such a hearing from Gafta; if granted, the tribunal will seek confirmation from the other side and will fix hearing dates. After the oral hearing the tribunal will prepare its award and send it to Gafta.  The awards are published in writing and signed by the arbitrator(s).  In the award, the tribunal will give summary of the dispute, the reasons for their decisions and their findings of fact.

Upon receipt of the signed award, Gafta will notify the parties that the award is at their disposal upon payment of fees and expenses incurred by the tribunal and Gafta.  Once payment is received, Gafta will date and issue the award to the parties. The tribunal’s award shall be conclusive and binding, subject to any appeal to the board of appeal. If the losing party fails to make the award payment, Gafta may inform its world-wide members by posting the non-paying party as a defaulter. This puts Gafta’s members on notice about the risks of dealing with that defaulting party in future and is intended to create a serious barrier to the future trade of a party who fails to pay.

As can be seen, two tiers exist within the Gafta arbitration system: the first-tier arbitration tribunal and the appeal board.  An unsatisfied party can appeal the first-tier tribunal’s award to the appeal board. In Gafta, unlike in the courts, appeals are not reviews of the first-tier tribunal’s decision based only on what was said to the first court, but are fresh hearings of the claim in which parties can adduce new facts, issues and laws.

This is because international parties are often not well-versed in internal arbitration laws and may not have fully appreciated the implication of an arbitration claim and may have failed to obtain competent legal advice. Unsuccessful parties often only realise the importance of good legal advice when they receive an unfavourable award.  In these circumstances the Gafta appeal rules provide unprepared parties with a second chance.

Appeal to the court

Gafta contracts provide for English law as the applicable law and the English courts have jurisdiction over the tribunal’s awards. It is possible for an unsuccessful party to appeal an award to the court. Such an appeal is rare, however, because it can only be made on legal merits and the court will only grant leave to appeal in limited circumstances. The decision of the tribunal may also be challenged on the basis of serious irregularity on the part of the tribunal, which includes issues such as bias. The court may either confirm the tribunal’s award, set it aside, vary it or remit it back to the arbitrators to decide again.

Conclusion

A Gafta arbitration is a serious alternative to a court case: it is very important claimants and respondents give full consideration to the issues involved. This is especially true of international parties not familiar with the English legal system. It also must always be borne in mind that appeals to the courts after an arbitration award can only be on issues of law, not of facts.

The courts recognise that Gafta’s arbitrators have a personal knowledge of and considerable technical expertise of their sectors and rarely allow appeals. Parties are advised always to take full legal advice and assistance at the time of drafting their first submissions to the tribunal.

Pavani Reddy is the managing partner of Zaiwalla & Co Solicitors

The UK Supreme Court has this week dismissed Air India’s appeal against the decision of the English Court of Appeal in respect of unpaid employment dues of the Heathrow Airport former In-flight Services Manager, Mr Minoo Driver who hails from Mumbai.  This decision of the Supreme Court was given by three Judges, Lord Hope, Lord Mance and Lord Sumption.

The Court of Appeal had earlier in its judgment, in favour of Mr Driver, severely criticised Air India’s conduct and found Mr Driver to be an honest and truthful employee and his claims to be genuine.

Air India had appealed against this judgment and had instructed new solicitors and Queen’s Counsel to pursue the appeal before the Supreme Court. Air India had extensively argued that the appeal raised matters of wider public interest in relation to employment as it would entail a danger that the decision of the English Court of Appeal would be relied on to impose on employers a duty to pay overtime when that was not the true intent of the parties.

The Supreme Court, after considering extensive submissions by both sides communicated its decision to the parties on 7 February 2012, refusing Air India permission to appeal and thereby dismissing Air India’s appeal.  The Supreme Court further ordered Air India not only to bear its own costs but also to bear the respondent, Mr Driver’s costs.  The Supreme Court held that Air India’s appeal did not raise an arguable point of law of general public importance for the Supreme Court to consider, especially as the case had been the subject of a judicial decision, reviewed on appeal and that the case turned on its rather special facts and therefore did not merit the attention of the Supreme Court.

It is both unfortunate and regrettable that Air India management had decided to challenge a bona fide employment claim of an employee who had worked dedicatedly with Air India for 32 years instead of attempting to find a constructive solution.  Consequently, Air India has unnecessarily by its belligerent attitude incurred costs liability which would be in the region of £350,000 (Rs 2.8 crores) which Air India could have avoided.

Mr Kinshuk Chatterjee of Zaiwalla & Co. Solicitors, who had acted for Mr Driver said:

“Mr Driver is delighted with this result and surprised that Air India had pursued this appeal to the Supreme Court in the first place after Air India was severely criticized by the Court of Appeal.  The irony is that where on one hand Air India had chosen to ignore Mr Driver’s grievances of unpaid allowances, they have now been burdened with paying Mr Driver his employment claim with accrued interest and Mr Driver’s legal costs in the High Court, the Court of Appeal and now the Supreme Court.”

Mr Minoo Driver, who was in Air India’s employment since 1972, retired from the Air India in 2007 with substantial payments owing to him and Mr Driver was therefore compelled to redress his rights in the law courts.

Mr Driver’s appeal was successfully handled in the Court of Appeal and the Supreme Court by leading London solicitors’ firm, Zaiwalla & Co.

The Times of India

February 12th 2012

Ex-staffer wins AI dues from UK court

In a huge embarrassment for Air India (AI), the UK Supreme Court this week refused to grant the airline permission to appeal a stinging Queen’s Bench verdict to pay its former in-flight catering manager at Heathrow airport his overtime (OT) charges, which were stopped suddenly, six years before his retirement.

The English Court of Appeal had last July found no explanation other than “harassment by the local AI management” of Minoo Driver a “conscientious employee” who served AI for over three decades.

Driver (70) worked 2,792 hours overtime in 30 months between 2002 and 2006 in UK and made an “honest” claim for his unpaid dues worth around 57,000 pounds, the court said. Air India, now not only has to pay him his dues with interest but also the litigation costs, an amount expected to exceed 3,50,000 pounds (Rs 2.8 crore), said Driver’s lawyer. The AI management criticized the appeal court ruling which had overturned a trial court order that was in the airline’s favour.

It said its appeal now raised a “wider public interest” on the issue of contractual obligations. The appeal, however, also showcased perhaps the airline’s real fear that the ruling “will be relied on to impose on employers, a duty to pay for overtime when that was not the true objective intention of the parties.”

Preventing AI’s appeal plans to even take off, the SC held that the application raised “no arguable point of law of general public importance which ought to be considered by the Supreme Court.” Thus slamming AI, the SC also directed the national carrier to pay Driver the “cost of application and litigation.”

The SC also noted that the case “has already been subject of judicial decision and reviewed on appeal and the case turns on its rather special facts.” In UK, for an appeal to be heard by the House of Lords, the would-be appellant must show why it merits the court’s attention on legal aspects too.

Driver’s solicitor Sarosh Zaiwalla of Zaiwalla and Co, one the oldest law firm set up by an Indian in UK, said the ruling is a setback for AI and has “exposed its aim of harassment against a hapless employee who brings a challenge in court to obtain his rightful dues.” The appeal was an oppressive move against Driver, he had told the court especially when the court had held that contract with AI had quite plainly contemplated payment for overtime, if such additional hours were ‘required’ to be worked. “I am happy now,” Driver told TOI from his UK home. His fight was “on matters of principle.” He had written nine letters to AI for his dues in three years. His letters were “ignored , deliberately without good reason,” the court said.

In 2005, then AI chief Thulasidas endorsed his claim after Driver’s superior approved it as genuine, but it was still not implemented, the court noted. AI argued that it has the “unilateral right to decide whether it would pay for overtime or shift work at all” but the court had held that the airline failed to exercise its contractual discretion and hence awarded Driver minimum rate for overtime as determined in AI’s overtime claim sheet. Driver, who went to London in 1999, retired as catering manager (Europe) in 2007. From December 31, 2001, AI stopped paying him for overtime and a year later for his shift allowance. It also withheld his car and telephone allowance of around 20,000 pounds.

He said he was entitled to OT as per guidelines. The airline made allegations of fraud against Driver which the English court found to be untrue. Undaunted, AI even sought a CBI probe against Driver. Driver earned 24,000 pounds annually could not be expected to have to work overtime beyond the normal 37.5 hours weekly without expectation of pay, the court had said, adding that in an airline staffer on the ground had the duty to decide if circumstances required extra hours without pre-authorization, which then would need to be paid for.

Skyport News

17th February 2012

£250k payout for Air India catering boss

By Salina Patel

A former catering manager has won a long-running battle against ex-employers Air India after the Supreme Court refused to grant the airline an appeal.

Air India was ordered to pay Minoo Driver, who worked in the airline’s inflight services department at Heathrow, around £250,000 to cover money owed to him, compensation, and legal costs.

The judgement was initially made by the Court of Appeal, who ruled in Mr Driver’s favour in July 2011, over overtime and other employment claims.

Since then, the company’s application for permission to appeal the decision was declined by the Court of Appeal, and turned down again by the Supreme Court on February 6, incurring additional legal costs to pay up.

Mr Driver said: “I am very happy I got my dues back and the British justice system was fast.

“I have nothing against the company as it was a personal vendetta from one officer against me.”

Of the £250,000, he will receive $100,000 in compensation, of which up to £70,000 is money he is owed.  The remaining will cover legal costs.

Mr Driver dedicated 35 years to the airline before retiring in 2007 with substantial payments owing to him, which forced him to take action in the courts.

Originally a Parsee from Mumbai, he had been working for the company since 1972, but his longstanding relationship soured when his grievances were ignored and he was denied contractual entitlements.

The Court of Appeal criticised Air India’s conduct and found Mr Driver to be an honest and truthful employee and his claims to be genuine.

Air India is believed to have told the Supreme Court there was a danger the Appeal Court’s decision would be relied on to impose on employers a duty to pay overtime.

However, the Supreme Court did not accept the argument especially as the case had been the subject of a judicial decision.

Sarosh Zaiwalla of Zaiwalla & Co Solicitors, who was acting for Mr Driver said: “My client and I are delighted with this result and surprised that Air India brought this appeal in the first place.

“The irony is that were on one hand Air India had chosen to ignore Mr Driver’s grievances of unpaid allowances, they have now been burdened with paying Mr driver his employment claim with accrued interest and Mr Driver’s legal costs in the High Court, the Court of Appeal and now the Supreme Court.”

Air India were not available for comment.

January 2012

Legal Eagle

Unfortunately, despite best efforts, there are times with legal wrangles arise.  Kinshuk Chatterjee, lawyer at Zaiwalla & Co Solicitors, offers advice on the settlement of disputes between companies

Where there is a business, particularly one which involves cross dealings with third parties, legal disputes do arise and businessmen do get involved in legal suits.  It is advisable that parties should aim at settling the claim. Not always will the claimant get every penny of his claim amount but litigation proceedings involve costs and are time consuming.  In addition, it often results in souring the relations between two business groups forever.

A legal settlement must be conducted and finalised with caution. There have been numerous examples in the past where parties have approached the court to determine what the terms of the settlement were. This negates the purpose of concluding a settlement in the first instance. The terms of the settlement should be clear and well understood between the parties, in other words the parties should be ad idem. A legal settlement is in essence a contract by itself. A promise is made by one party to the other that if the latter forgoes a legal claim, the former will suffer some detriment. It is in consideration of this promise that the party intending to litigate its dispute settles the matter.

Although a legal settlement is a contract, there is no requirement for a standard form for a settlement to be concluded. Settlement agreements are governed by principles of contract law and a chain of emails exchanged between two parties can result in legal settlement so long as the requirements of a contract formation are present.

English courts have a strong propensity to uphold contracts. Therefore a party who subsequently raises an argument that it was not its intention to enter into a binding agreement has to make a very strong argument in court. This can be a daunting task especially if there is no written communication to this effect. Therefore parties should make their intention very clear in writing/ correspondence that they do not consider themselves to be contractually bound. Likewise, consideration is also an important aspect whilst negotiating a legal settlement. A party should understand the value in exchange of which it will agree to relinquish its right to bring or continue its claim in a court of law. Courts do not value the consideration that moved from one contracting party to the other. In other words, a court of law will seldom adjudicate on the issue of whether the value exchanged between parties was adequate but rather whether it was sufficient to fulfil the mandates of a valid consideration under the law of contract.

Therefore parties should make their intention very clear even in informal exchanges as a simple “yes” or “no” in written communication could be said to reflect a party’s intention to settle a matter.

Tank Storage Magazine

January 2012

Settling disputes in the UK

When a legal claim arises, the temptation may be to settle, but caution needs to be exercised in the negotiation process.  It is important for companies to know when to involve solicitors.

In any business, particularly ones which involves cross-dealings with third parties, disputes invariably arise and businessmen get involved in legal suits. There is an apprehension that once a case has begun it will continue for a long time, and that litigant will have to bear the costs of the litigation and the legal costs of their adversary, should the claim be decided against them. Therefore, it is advisable parties aim to settle the dispute.

Provisions have been made in legal procedures which allow parties the scope to make a legal settlement. A Part 36 Offer, as it is popularly called, is a self contained code and provides guidelines for parties on how to make or accept an offer to settle. Interestingly, a Part 36 offer must be in writing and state whether it relates to the full claim or a part thereof and it also allows an opportunity for the person receiving the offer (the offeree) to seek clarifications of the offer made by the offeror.

Parties should exercise abundant caution in making an offer of settlement and conducting settlement dialogue, as it needs to be absolutely sure they conclude a settlement only of that dispute which they intend and no more. There have been numerous examples in the past where parties have approached the court to decide what the terms were of a settlement that was made between the two sides themselves. This negates the purpose of concluding a settlement in the first place. The terms of the settlement should be clear and well-understood between the parties; in other words, the parties should be ad idem. A legal settlement is in essence a contract by itself. A promise is made by one party to the other that if the latter forgoes a legal claim, the former will suffer some detriment and offer the other a benefit. It is in consideration of this promise that the party intending to litigate its dispute settles the matter.

Although a legal settlement is a contract, this does not mean it can only exist as a single, signed legal document. Settlement agreements are governed by principles of contract law, and so a chain of emails exchanged between two parties can result in legal settlement so long as the requirements of contract formation are present. The English Court in Golden Ocean Group Limited v Salgaocar Mining Industries Limited & another did not accept the argument that if an agreement had been made in writing, there was some limit to the number of documents to which reference was permissible. If there was said to have been an agreement in writing, the court was entitled to look at those documents which were said to constitute the agreement, however many they may be.

There is no requirement for parties to place their signature on a single piece of paper, which can then be forever pin-pointed as ‘the’ legal settlement between the parties. The legal principle that a settlement is for all intents and purposes an enforceable agreement means the essentials of a valid contract ought to be present; a document having the appearance of an agreement is not enough. One may derive comfort from the thought that ‘if I didn’t sign the document, it isn’t a contract’. That thought can be potentially dangerous. If parties have given full effect to an unsigned document through their conduct, the court shall consider that there was a contractual agreement between parties. There are, of course, exceptions to this. Transactions for the transfer of property are agreements where signature of parties is a sine qua non for execution of the contract.

It is also a myth that where the subsequent execution of a further document is contemplated by the parties at the time of what would otherwise be an agreement, that agreement at first instance, whether a single document or a chain of correspondence, is not a binding contract. The intention of parties to create legal contractual relations will be inferred from the conduct of parties: does that conduct suggest that they intended the future document actually to constitute the real agreement, or was it just to be a record of what was already an established agreement between parties? This is an objective test which courts use to ascertain whether an agreement was concluded.

English courts have a strong propensity towards upholding contracts. This is because it is presumed that parties intended to create a legal relationship when entering into a settlement. Therefore, if a party who appears to have made a settlement wants to raise an argument afterwards that it was not its intention to enter into the settlement, it has to make a very strong argument in court. This can be a daunting task, especially if there is no written communication to prove this lack of intention. Therefore, parties should make their intentions very clear in writing, stating that they do not consider themselves to be contractually bound to a legal settlement if that is actually how they feel.

This presumption in favour of upholding settlements is an extension of the principle of consensus ad idem; the Court will conduct an objective test to establish whether the parties were ‘of a mind’, in that they both wanted to create the same legally enforceable settlement. Therefore, a party who intends to displace this presumption is required to make an objective argument that, given the circumstances of the case, it would be incorrect to presume that a legal settlement had been concluded. An argument the party itself did not intend to conclude a legal settlement is a subjective argument and as such would not hold water before an English court or tribunal.

The English courts in such cases take the test of the ‘reasonable bystander’. If a reasonable bystander on his observation found that correspondence between parties had resulted in making an offer and acceptance of that offer, it would not matter that one party did not intend to conclude a legal settlement.

Likewise, consideration is also an important aspect when negotiating a legal settlement. A party should understand the value it will receive in exchange for its agreement to relinquish its right to bring or continue its claim in a court of law. Courts do not make judgments on whether the consideration that moved from one party to the other represents good value to the recipient, only on the question of whether any consideration was present. In other words, a court of law will seldom adjudicate on the issue of whether the value exchanged between parties was adequate, but rather whether it was sufficient to fulfil the requirement of valid consideration under the law of contract. The result of that is that a party who makes a bad bargain cannot look to the courts to help it out.

In a celebrated case, the House of Lords confirmed the doctrine that a court does not investigate the adequacy of consideration when it upheld the ruling that chocolate wrappers sent by members of the public to obtain music records were part of the consideration of the contract, notwithstanding that the company would throw away the wrappers once they were received.

A promise made by a defendant that it will consider the claimant for future business if the latter drops its claim against the former is valid consideration. An offeree cannot then complain that it did not make profit from any future business, and as such there was actually no consideration. In such a case the consideration for dropping the claim was ‘to consider the claimant for future business’ and not ‘to do future business.’ Therefore the fact that the claimant ultimately forsake his claim without ever any monetary benefit is immaterial.

A business person, or for that matter any one who is not well-acquainted with legal nuance, will often use words without stopping to consider that a word used by him may be construed by another in a totally different sense to that which the author had intended. Therefore, parties should make their intentions very clear even in informal exchanges: a simple ‘yes’ or ‘no’ in written communications could be said to reflect a party’s intention to settle a matter.

The presence of a solicitor whilst settlement negotiations are ongoing is always helpful, because the settlement can then be made as watertight as possible, which will in turn ensure that parties do not have to approach the court in future to resolve the issue whether or not there was a settlement, or what its terms where.

Whether a party handles its own legal settlement or is represented by a lawyer, the key is to make the party’s intentions crystal clear. A claimant must be aware that, in effecting a legal settlement, it is essentially giving up its right to bring the claim again in a court of law, and therefore all the issues in the dispute that it wanted to resolve should be meticulously spelled out. This ensures that parties are on the same footing whilst the negotiation is being finalised, and makes an out of court settlement final and meaningful.

For more information:

This article was written by Kinshuk Chatterjee, a lawyer at Zaiwalla & Co Solicitors. k.chatterjee@zaiwalla.co.uk; +44 207 312 1000; www.zaiwalla.co.uk

Heating and Ventilation News

30th November 2011

Conducting and settling disputes requires caution

On introducing myself as a lawyer to a gentleman I met at a recent party, he quipped that he had been enjoying himself thoroughly until I told him I was a lawyer. He then wanted to know how many of us lawyers were at the party. Businessmen clearly despise legal disputes, and given their way they would have nothing to do with lawyers. The real business world, however, does not work like that.

Where any business is trading, particularly one which involves cross-dealings with third parties, disputes arise and businessmen get involved in legal suits.  It is advisable that parties should aim to settle the claim. A claimant will not always get every penny of the amount he claims, but litigation proceedings incur costs and are time-consuming, and they often permanently sour the relations between businesses.

A legal settlement must be conducted and finalised with caution. There have been numerous examples in the past where parties have approached the Court to decide what the terms were of the settlement that was made by the two sides themselves. This negates the purpose of concluding a settlement in the first place.

The terms of the settlement should be clear and well-understood between the parties; in other words, the parties should be ad idem. A legal settlement is in essence a contract by itself.

A promise is made by one party to the other that if the latter forgoes a legal claim, the former will suffer some detriment. It is in consideration of this promise that the party intending to litigate its dispute settles the matter.

Although in essence a contract, this does not mean that it can only exist as a single, signed legal document. Settlements are governed by principles of contract law, and so a chain of emails exchanged between two parties can result in legal settlement so long as the requirements of contract formation are present.

English Courts have a strong propensity towards upholding contracts. Therefore, a party who raises an argument subsequent to the contract that it was not its intention to enter into a binding agreement has to make a very strong argument in Court. This can be a daunting task, especially if there is no written communication to this effect.

Parties should make their intentions very clear in writing, stating that they do not consider themselves to be contractually bound if that is actually how they feel. Consideration is also an important aspect when negotiating a legal settlement. A party should understand the value it will receive in exchange for its agreement to relinquish its right to continue its claim.

Courts do not make judgements on the value of the consideration that moved from one party to the other, only on the question of whether consideration was present. The result of that is that a party who makes a bad bargain cannot look to the Courts to help them out.

Therefore, parties should make their intentions very clear even in informal exchanges: a simple “yes” or “no” in written communications could be said to reflect a party’s intention to settle a matter.

Kinshuk Chatterjee is a lawyer at  Zaiwalla & Co Solicitors

Site Recorder

1st December 2011

Settlement of Disputes

In any business, particularly one which involves cross-dealings with third parties, disputes invariably arise and businessmen get involved in legal suits. There is an apprehension that once a case has begun it will continue for ages, and that litigant will have to bear the costs of the litigation and the legal costs of their adversary, should the claim be decided against them. Therefore, it is advisable that parties should aim to settle the dispute.

Provisions have been made in legal procedures which allow parties the scope to make a legal settlement. Part 36 of the Civil Procedure Rules provides a statutory procedure for parties on how to make or accept an offer to settle. These directives serve a significant purpose in reducing uncertainty between parties regarding proposed terms of settlement. However, all legal settlements do not emanate from Part 36 offers made by a litigant to its adversary, especially in arbitration proceedings, which are not governed by the rigours of Civil Procedure Rules.

When making an offer of settlement, abundant caution should be exercised in making an offer of settlement and conducting settlement dialogue, as a party needs to be absolutely sure that he concludes a settlement only of that dispute which he intends and no more.

There have been numerous examples in the past where parties have approached the Court to decide what the terms were of a settlement that was made between the two sides themselves. This negates the purpose of concluding a settlement in the first place. The terms of the settlement should be clear and well-understood between the parties; in other words, the parties should be ad idem. A legal settlement is in essence a contract by itself. A promise is made by one party to the other that if the latter forgoes a legal claim, the former will suffer some detriment and offer the other a benefit. It is in consideration of this promise that the party intending to litigate its dispute settles the matter.

Although a legal settlement is a contract, this does not mean that it can only exist as a single, signed legal document. Settlement agreements are governed by principles of contract law, and so a chain of emails exchanged between two parties can result in legal settlement so long as the requirements of contract formation are present. The English Court in Golden Ocean Group Limited v Salgaocar Mining Industries Limited & another did not accept the argument that if an agreement had been made in writing, there was some limit to the number of documents to which reference was permissible. If there was said to have been an agreement in writing, the Court was entitled to look at those documents which were said to constitute the agreement, however many they may be.

Following the above, there is no requirement for parties to place their signature on a single piece of paper, which can then be forever pin-pointed as ‘the’ legal settlement between the parties. The legal principle that a legal settlement is for all intents and purposes an enforceable agreement means that the essentials of a valid contract ought to be present; a document having the appearance of an agreement is not enough. So much so, that if parties have given full effect to an unsigned document through their conduct, the Court shall consider that there was a contractual agreement between parties. There are, of course, exceptions to this. Transactions for the transfer of property are agreements where signature of parties is a sine qua non for execution of the contract.

It is also a myth that where the subsequent execution of a further document is contemplated by the parties at the time of what would otherwise be an agreement, that agreement at first instance, whether a single document or a chain of correspondence, is not a binding contract.

English Courts have a strong propensity towards upholding contracts. This is because it is presumed that parties intended to create a legal relationship when entering into a settlement. Therefore, if a party who appears to have made a settlement wants to raise an argument afterwards that it was not its intention to enter into the settlement, it has to make a very strong argument in Court.

This presumption in favour of upholding settlements is an extension of the principle of consensus ad idem; the Court will conduct an objective test to establish whether the parties were ‘of a mind’, in that they both wanted to create the same legally enforceable settlement. Therefore, a party who intends to displace this presumption is required to make an objective argument that, given the circumstances of the case, it would be incorrect to presume that a legal settlement had been concluded. An argument that the party itself did not intend to conclude a legal settlement is a subjective argument and as such would not hold water before an English Court or Tribunal.

Likewise, consideration is also an important aspect when negotiating a legal settlement. A party should understand the value it will receive in exchange for its agreement to relinquish its right to bring or continue its claim in a Court of law. Courts do not make judgements on whether the consideration that moved from one party to the other represents good value to the recipient, only on the question of whether any consideration was present. In other words, a Court of law will seldom adjudicate on the issue of whether the value exchanged between parties was adequate, but rather whether it was sufficient to fulfil the requirement of valid consideration under the law of contract.

In a celebrated case, the House of Lords confirmed the doctrine that a court does not investigate the adequacy of consideration when it upheld the ruling that chocolate wrappers sent by members of the public to obtain music records were part of the consideration of the contract, notwithstanding that the company would throw away the wrappers once they were received.

A business person, or for that matter any one who is not well-acquainted with legal nuance, will often use words without stopping to consider that a word used by him may be construed by another in a totally different sense to that which the author had intended. Therefore, parties should make their intentions very clear even in informal exchanges as a simple “yes” or “no” in written communications could be said to reflect a party’s intention to settle a matter.

Kinshuk Chatterjee is a Lawyer at  Zaiwalla & Co Solicitors, a niche London law firm specialising in international commercial arbitration and litigation k.chatterjee@zaiwalla.co.uk 0207 312 1000 www.zaiwalla.co.uk

Food Processing

13th December

Settlement of Disputes

Author : Kinshuk Chatterjee

A legal settlement must be conducted and finalised with caution, particularly in the food industry where unnecessary expenses should be avoided at all costs.

In any business, particularly one that involves cross-dealings with third parties, disputes invariably arise and businessmen get involved in legal suits. There is an apprehension that once a case has begun it will continue for ages, and that litigant will have to bear the costs of the litigation and the legal costs of their adversary, should the claim be decided against them. Therefore, it is advisable that parties should aim to settle the dispute.

A legal settlement must be conducted and finalised with caution. There have been numerous examples in the past where parties have approached the Court to decide what the terms were of the settlement that was made by the two sides themselves. This negates the purpose of concluding a settlement in the first place.

The terms of the settlement should be clear and well-understood between the parties; in other words, the parties should be ad idem. A legal settlement is in essence a contract by itself. A promise is made by one party to the other that if the latter forgoes a legal claim, the former will suffer some detriment. It is in consideration of this promise that the party intending to litigate its dispute settles the matter.

It is a myth that a legal settlement has to exist as a single, signed legal document. Settlement agreements are governed by principles of contract law, and so a chain of emails exchanged between two parties can result in legal settlement so long as the requirements of contract formation are present.
English Courts have a strong propensity towards upholding contracts.

Therefore, a party who raises an argument subsequent to the contract that it was not its intention to enter into a binding agreement has to make a very strong argument in Court. This can be a daunting task, especially if there is no written communication to this effect. Therefore, parties should make their intentions very clear in writing/correspondence, stating that they do not consider themselves to be contractually bound if that is actually how they feel.

Likewise, consideration is also an important aspect when negotiating a legal settlement. A party should understand the value it will receive in exchange for its agreement to relinquish its right to bring or continue its claim in a Court of law. Courts do not make judgements on the value of the consideration that moved from one contracting party to the other, only on the question of whether consideration was present.

In other words, a Court of law will seldom adjudicate on the issue of whether the value exchanged between parties was adequate, but rather whether it was sufficient to fulfil the mandates of a valid consideration under the law of contract. The result of that is that a party who makes a bad bargain cannot look to the Courts to help them out.

In a celebrated case, the House of Lords confirmed the doctrine that a court does not investigate the adequacy of consideration when it upheld the ruling that chocolate wrappers sent by members of the public to obtain a music record from the company making this offer, were part of the consideration, notwithstanding that the company would throw away the wrappers once received.

Therefore, parties should make their intentions very clear even in informal exchanges: a simple “yes” or “no” in written communications could be said to reflect a party’s intention to settle a matter. One should bear in mind that not all legal disputes can be settled in the same manner as disputes which involve some kind of pecuniary consideration.

There may be legal disputes involving infringement of compliance measures (product liability cases) imposed by a regulator or infringement of an intellectual property where permanent injunction from using the trademark or copyright is the standard remedy.

For instance in the manufacturing industry the company may often find itself in a dispute defending its intellectual property or defending itself against a personal injury claim or even a dispute involving breach of compliance measures. In such cases an out of court settlement is plausible only in the second case where the compensation amount can be negotiated with the Claimant.

Manufactures are also faced with trade union actions and often a settlement between the management and the union may result in striking of potential industrial action. For instance plans for industrial action were called off by workers of Heinz in the Kitt Green unit when a revised pay structure increasing basic pay by 3.9% was accepted by a majority vote. This apart manufacturing industries operating in the retail market are faced by claims by unhappy consumers. In such cases too the company should aim at concluding a legal settlement with the complainant, of course bearing in mind what has been discussed earlier.

* Kinshuk Chatterjee is a Lawyer at Zaiwalla & Co Solicitors.
Kinshuk Chatterjee, Zaiwalla & Co: k.chatterjee@zaiwalla.co.uk 0207 312 1000 www.zaiwalla.co.uk

The Expert and Dispute Resolver

Winter 2011

Settlement of Disputes

I recently met a gentleman at a party who quipped that he had thoroughly enjoyed meeting me until I told him that I was a lawyer. He then wanted to know how many of us lawyers were at the party. Businessmen clearly despise legal disputes, and given their way they would have nothing to do with lawyers. The real business world, unfortunately, does not work like that.

When any business trades, particularly in a way which involves cross-dealings with third parties, disputes invariably arise and businessmen do get involved in legal suits. There is an apprehension that once a case has begun it will continue for ages, and that litigant will have to bear the costs of the litigation and the legal expenses of their adversary, should the claim be decided against them.

A legal settlement is therefore an important tool for putting an end to legal proceedings and allowing parties to effect a compromise. In fact, it is advisable that parties should aim to settle the claim. A claimant will not always get every penny of the amount he claims. However, litigation proceedings incur costs and are time-consuming, and they often permanently sour the relations between two business groups.

Provisions have been made in legal procedures which allow parties the scope to make a legal settlement. Part 36 of the Civil Procedure Rules provides a statutory procedure for settlement which is complete in its own right. A Part 36 Offer, as it is popularly called, is a self contained Code and provides guidelines for parties on how to make or accept an offer to settle. Interestingly, a Part 36 offer must be in writing and state whether it relates to the full claim or a part thereof and it also allows an opportunity for the person receiving the offer ‘the offeree’ to seek clarifications of the offer made by the offeror.

These directives serve a significant purpose in reducing uncertainty between parties regarding proposed terms of settlement. However, all legal settlements do not emanate from Part 36 offers made by a litigant to its adversary. For instance, arbitration proceedings are not governed by the rigours of Civil Procedure Rules and parties are left much to their own discretion as to how best to make an offer of settlement through regularly exchanged correspondence.

When making an offer of settlement, parties should be cautious to compromise only to the extent they desire. A legal settlement is, more often than not, a full and final settlement where parties relinquish their right to re-litigate the issues at hand. Therefore, abundant caution should be exercised in making an offer of settlement and conducting settlement dialogue, as a party needs to be absolutely sure that he concludes a settlement only of that dispute which he intends and no more.

There have been numerous examples in the past where parties have approached the Court to decide what the terms were of a settlement that was made between the two sides themselves. This negates the purpose of concluding a settlement in the first place. The terms of the settlement should be clear and well-understood between the parties; in other words, the parties should be ad idem. A legal settlement is in essence a contract by itself. A promise is made by one party to the other that if the latter forgoes a legal claim, the former will suffer some detriment and offer the other a benefit. It is in consideration of this promise that the party intending to litigate its dispute settles the matter.

Although a legal settlement is a contract, this does not mean that it can only exist as a single, signed legal document. Settlement agreements are governed by principles of contract law, and so a chain of emails exchanged between two parties can result in legal settlement so long as the requirements of contract formation are present. The English Court in Golden Ocean Group Limited v Salgaocar Mining Industries Limited & another, did not accept the argument that if an agreement had been made in writing, there was some limit to the number of documents to which reference was permissible. If there was said to have been an agreement in writing, the Court was entitled to look at those documents which were said to constitute the agreement, however many they may be.

Following the above, there is no requirement for parties to place their signature on a single piece of paper, which can then be forever pin-pointed as ‘the’ legal settlement between the parties. The legal principle that a legal settlement is for all intents and purposes an enforceable agreement means that the essentials of a valid contract ought to be present; a document having the appearance of an agreement is not enough. One may derive comfort from the thought that “if I didn’t sign the document, it isn’t a contract.” That thought can be potentially dangerous. If parties have given full effect to an unsigned document through their conduct, the Court shall consider that there was a contractual agreement between parties. There are, of course, exceptions to this. Transactions for the transfer of property are agreements where signature of parties is a sine qua non for execution of the contract.

It is also a myth that where the subsequent execution of a further document is contemplated by the parties at the time of what would otherwise be an agreement, that agreement at first instance, whether a single document or a chain of correspondence, is not a binding contract. The intention of parties to create legal contractual relations will be inferred from the conduct of parties: does that conduct suggest that they intended the future document actually to constitute the real agreement, or was it just to be a record of what was already an established agreement between parties? This is an objective test which Courts use to ascertain whether an agreement was concluded.

English Courts have a strong propensity towards upholding contracts. This is because it is presumed that parties intended to create a legal relationship when entering into a settlement. Therefore, if a party who appears to have made a settlement wants to raise an argument afterwards that it was not its intention to enter into the settlement, it has to make a very strong argument in Court. This can be a daunting task, especially if there is no written communication to prove this lack of intention. Therefore, parties should make their intentions very clear in writing/correspondence, stating that they do not consider themselves to be contractually bound to a legal settlement if that is actually how they feel.

This presumption in favour of upholding settlements is an extension of the principle of consensus ad idem; the Court will conduct an objective test to establish whether the parties were ‘of a mind’, in that they both wanted to create the same legally enforceable settlement. Therefore, a party who intends to displace this presumption is required to make an objective argument that, given the circumstances of the case, it would be incorrect to presume that a legal settlement had been concluded. An argument that the party itself did not intend to conclude a legal settlement is a subjective argument and as such would not hold water before an English Court or Tribunal.

The English Courts in such cases take the test of the “reasonable bystander.” If a reasonable bystander on his observation found that correspondence between parties had resulted in making an offer and acceptance of that offer, it would not matter that one party did not intend to conclude a legal settlement.

Likewise, consideration is also an important aspect when negotiating a legal settlement. A party should understand the value it will receive in exchange for its agreement to relinquish its right to bring or continue its claim in a Court of law. Courts do not make judgments on whether the consideration that moved from one party to the other represents good value to the recipient, only on the question of whether any consideration was present. In other words, a Court of law will seldom adjudicate on the issue of whether the value exchanged between parties was adequate, but rather whether it was sufficient to fulfil the requirement of valid consideration under the law of contract. The result of that is that a party who makes a bad bargain cannot look to the Courts to help them out.

In a celebrated case, the House of Lords confirmed the doctrine that a court does not investigate the adequacy of consideration when it upheld the ruling that chocolate wrappers sent by members of the public to obtain music records were part of the consideration of the contract, notwithstanding that the company would throw away the wrappers once they were received.

A promise made by a Defendant that it will consider the Claimant for future business if the latter drops its claim against the former is valid consideration. An offeree cannot then complain that it did not make profit from any future business, and as such there was actually no consideration. In such a case the consideration for dropping the claim was ‘to consider the Claimant for future business’ and not ‘to do future business.’ Therefore the fact that the Claimant ultimately forsake his claim without ever any monetary benefit is immaterial.

A business person, or for that matter any one who is not well-acquainted with legal nuance, will often use words without stopping to consider that a word used by him may be construed by another in a totally different sense to that which the author had intended. Therefore, parties should make their intentions very clear even in informal exchanges: a simple “yes” or “no” in written communications could be said to reflect a party’s intention to settle a matter.

The presence of a solicitor whilst settlement negotiations are ongoing is always helpful, because the settlement can then be made as watertight as possible, which will in turn ensure that parties do not have to approach the Court in future to resolve the issue whether or not there was a settlement, or what its terms where.

Whether a party handles their own legal settlement or is represented by a lawyer, the key is to make the party’s intentions crystal clear. A Claimant must be aware that, in effecting a legal settlement, it is essentially giving up its right to bring the claim again in a Court of law, and therefore all the issues in the dispute that it wanted to resolve should be meticulously spelled out. This ensures that parties are on the same footing whilst the negotiation is being finalised, and makes an out of court settlement final and meaningful.

Kinshuk Chatterjee is a Lawyer at  Zaiwalla & Co Solicitors

Kinshuk Chatterjee, Zaiwalla & Co.  Having qualified in 2007, Kinshuk joined the Supreme Court of India and was posted as a legal assistant to The Honerable Mr Justice Dalveer Bhandari. Thereafter he moved to the UK for a Masters degree specialising in corporate governance. Kinshuk has been involved in corporate litigations, breach of confidentiality claims and also advises on start-ups and privately owned businesses.

22nd November 2011

IMO Representative Speaks Out On The Piracy Of Freight Shipping Off Somalia

Anger at the Current Situation Pervades the Industry Worldwide

UK – SOMALIA – WORLDWIDE – Our article of a couple of days ago told of the Assembly of the International Maritime Organization (IMO) which is currently meeting in London and mentioned in passing that piracy remains high on the agenda. Now Sarosh Zaiwalla, a specialist in shipping law and a Permanent Representative to the IMO has commented on the current situation as regards the hijacking of bulk freight and container vessels passing through the troubled waters of the Gulf of Aden and beyond.

Mr Zaiwalla’s comments illustrate the increasing frustration which the global shipping community feels as year after year the problem of piracy worsens whilst little seems to be happening, either to address the political problems in Somalia, or to take internationally coordinated steps to deal with the situation directly using an armed response. Speaking to the Handy Shipping Guide Mr Zaiwalla said:

“In October, I addressed the Indian Shipping Summit in Mumbai. As a commercial lawyer who specialises in Shipping Arbitrations, I thought I would be asked about cargo disputes and Bills of Lading. The Indian Shipping Community however, despite always being a profoundly commercial group, had one thing on their minds that overtook even their bottom lines.

“International World Trade relies on the ability of traders to transport huge amounts of goods on giant moving structures across the most hostile seas in the world. These traders face enough challenges from nature and ill-fortune. It is nothing short of outrageous that, over the last few years, ship owners and seafarers have been forced to add the very real threat of violent piracy to the dangers of their normal lives. Piracy is a major threat not only to the shipping industry, but also to peace throughout the globe – if the world does nothing to stand up to people who use AK-47s and grenades to take the property of others, then what will stop thieves adopting the same tactics on the land?

“The Gulf of Aden off the coast of Somalia is now almost a no-go area for international ships. The most recent large scale act of piracy took place during the Indian summit, when the Italian ‘Monte Cristo’ was captured in this area. The crew managed to hide in their citadel, while the rest of the world wondered what could be done. It is a matter of great satisfaction that an international NATO force took charge and freed those men, but that is something that has not happened enough. More commonly, ransoms are paid for seafarers and cargo, meaning that expensive ‘Kidnap and Ransom’ insurance policies have added to the cost of shipping.

“The individual navy vessels from different countries that attempt to counter piracy are few in number and grossly inadequate for the task of patrolling the whole of the Indian Ocean. There is at present no coordinated approach. As a result, pirates are often captured only to be fed and returned to Somalia, free to go back to their old work of piracy.

“If international forces are to coordinate in order effectively to tackle piracy in the long term, I believe that they must combine their efforts into a UN Naval task force. This force could then concentrate on patrolling the coast of Somalia, from where the vast majority of the pirates emerge. I hope that we will all be surprised by the effect that could be brought about by such a force monitoring all small vessels leaving Somalia’s coastline to ensure they were genuine fishing vessels.

“With that in mind, I have used my position as a permanent member of the International Maritime Organisation (“IMO”) to force the issue. I had intended to move a resolution at the IMO for this purpose, but I will not now do so, as the Secretary General of the IMO has informed me that he himself with be moving this resolution. At the IMO’s General Meeting in November I hope to contribute to the pressure that will be required to create a Naval task force that may be able to save many lives, as well as a lot of money, by taking control of the Indian Ocean back from the pirates.

“Short of the creation of a UN naval taskforce, it is not going to be practical to control the plague of piracy. The Somalian pirates are effectively the same as any other terrorist. The only difference is that while international terrorists have so far indulged in acts of terrorism for the sake of their professed political causes, Somalia’s pirates indulge in terrorism only to fill their own pockets.

“Arming ocean-going vessels will go some way towards dealing with pirates, but for this course of action to work, many obstacles must be overcome. For example, Egypt will not allow vessels passing through the Suez Canal to carry on-board guns and ammunition. What also is of concern is the growing ‘industry’ around piracy. The total losses to the International Trade Community on account of piracy in the year so far is estimated to be US$2billion. Out of this US$2 billion, only about US$110 million represents ransom paid to the pirates, just over 1% of the total loss. The rest of the loss is mainly represented by increased insurance premiums, the cost of adapting ships to higher security standards and payments made to the specialist security companies which have sprung up to deal with piracy. At the end of the day, this additional cost falls on the consumer: they increase the freight charges and, consequently, the cost of the goods to the ultimate consumer.

“The 21st Century requires an enlightened approach to combat evils like piracy. It requires the countries of the world to come together, whether or not they share a coastline, to eradicate once and for all the Somalian piracy which has emerged in recent years. Any dragging of feet now would cause serious harm to the safety and livelihood of many innocent people, and would play right into the pirates’ hands.”

Mr Zaiwalla’s views, and those of his Indian shipping industry colleagues are perfectly reasonable but many other observers will be concerned at the thought that more freighters passing through these troubled waters might wish to carry arms, a move which may well lead to an escalation of violence by people who will have no hesitation in using extreme tactics as the disturbing video’s linked to one of our recent articles demonstrated.

Ideally a political solution to the troubles of Somalia together with an officially commissioned military response would be found, but, with the eyes of the world concentrated on a seemingly worsening financial global economy, the question will be if and when impassioned pleas from the likes of Mr Zaiwalla and his IMO colleagues can move this terrible situation on to a better place.

Anyone interested in the background to this story should type pirate into the News Search Box at the top of any page.

Photo: Sarosh Zaiwalla is a leading maritime law specialist and Senior Partner of Zaiwalla & Co Solicitors which specializes in international commercial arbitration and litigation and is Permanent Representative to the International Maritime Organization (IMO).

Tanker Operator

Janaury/February 2012

Plague of piracy is a call for the world to unite as one

As calls for a UN naval task force to combat piracy grow stronger, a leading maritime lawyer gives his views.*

In October, I addressed the Indian Shipping Summit in Mumbai. As a commercial lawyer who specialises in Shipping Arbitrations, I thought I would be asked about cargo disputes and Bills of Lading. The Indian Shipping Community however, despite always being a profoundly commercial group, had one thing on their minds that overtook even their bottom lines.

International world trade relies on the ability of traders to transport huge amounts of goods on giant moving structures across the most hostile seas in the world. These traders face enough challenges from nature and ill-fortune. It is nothing short of outrageous that, over the last few years, ship owners and seafarers have been forced to add the very real threat of violent piracy to the dangers of their normal lives.

Piracy is a major threat not only to the shipping industry, but also to peace throughout the globe – if the world does nothing to stand up to people who use AK-47s and grenades to take the property of others, then what will stop thieves adopting the same tactics on the land?

The Gulf of Aden off the coast of Somalia is now almost a no-go area for international ships. The most recent large scale act of piracy took place during the Indian summit, when the Italian Monte Cristo was captured in this area. The crew managed to hide in their citadel, while the rest of the world wondered what could be done.

It is a matter of great satisfaction that an international NATO force took charge and freed those men, but that is something that has not happened enough. More commonly, ransoms are paid for seafarers and cargo, meaning that expensive ‘Kidnap and Ransom’ insurance policies have added to the cost of shipping.

The individual navy vessels from different countries that attempt to counter piracy are few in number and grossly inadequate for the task of patrolling the whole of the Indian Ocean. There is at present no coordinated approach. As a result, pirates are often captured only to be fed and returned to Somalia, free to go back to their old work of piracy.

Combine efforts

If international forces are to co-ordinate in order effectively to tackle piracy in the long term, I believe that they must combine their efforts into a UN Naval task force. This force could then concentrate on patrolling the coast of Somalia, from where the vast majority of the pirates emerge. I hope that we will all be surprised by the effect that could be brought about by such a force monitoring all small vessels leaving Somalia’s coastline to ensure they were genuine fishing vessels.

With that in mind, I have used my position as a permanent member of the IMO to force the issue. I had intended to move a resolution at the IMO for this purpose, but I will not now do so, as the outgoing secretary general of the IMO has informed me that he himself with be moving this resolution. At the IMO’s General Meeting in November, I was hoping to contribute to the pressure that will be required to create a Naval task force that may be able to save many lives, as well as a lot of money, by taking control of the Indian Ocean back from the pirates.

Short of the creation of a UN naval taskforce, it is not going to be practical to control the plague of piracy. The Somali pirates are effectively the same as any other terrorist. The only difference is that while international terrorists have so far indulged in acts of terrorism for the sake of their professed political causes, Somalia’s pirates indulge in terrorism only to fill their own pockets.

Arming ocean going vessels will go some way towards dealing with pirates, but for this course of action to work, many obstacles must be overcome. For example, Egypt will not allow vessels passing through the Suez Canal to carry on board guns and ammunition (since believed to have been reversed).

What also is of concern is the growing ‘industry’ around piracy. The total loss to the international trade community on account of piracy in 2011, thus far, is estimated to be $2 bill. Out of this total, only about $110 mill represents ransom paid to the pirates, just over 1% of the total loss. The rest of the loss is mainly represented by increased insurance premiums, the cost of adapting ships to higher security standards and payments made to the specialist security companies, which have sprung up to deal with piracy.

* This article was written by Sarosh Zaiwalla who is a leading maritime law specialist and senior partner of Zaiwalla & Co Solicitors and is also a permanent representative to the IMO.

Safety 4 Sea

17th February 2012

Plague of piracy is call for the world to unite as one

In October, I addressed the Indian Shipping Summit in Mumbai. As a commercial lawyer who specialises in Shipping Arbitrations, I thought I would be asked about cargo disputes and Bills of Lading. The Indian Shipping Community however, despite always being a profoundly commercial group, had one thing on their minds that overtook even their bottom lines.

International world trade relies on the ability of traders to transport huge amounts of goods on giant moving structures across the most hostile seas in the world. These traders face enough challenges from nature and illfortune. It is nothing short of outrageous that, over the last few years, shipowners and seafarers have been forced to add the very real threat of violent piracy to the dangers of their normal lives.

Piracy is a major threat not only to the shipping industry, but also to peace throughout the globe – if the world does nothing to stand up to people who use AK-47s and grenades to take the property of others, then what will stop thieves adopting the same tactics on the land?

The Gulf of Aden off the coast of Somalia is now almost a no-go area for international ships. The most recent large scale act of piracy took place during the Indian summit, when the Italian Capesize bulker Monte Cristo was captured in this area. The crew managed to hide in their citadel, while the rest of the world wondered what could be done.

It is a matter of great satisfaction that an international NATO force took charge and freed those men, but that is something that has not happened enough. More commonly, ransoms are paid for seafarers and cargo, meaning that expensive ‘Kidnap and Ransom’ insurance policies have added to the cost of shipping.

The individual navy vessels from different countries that attempt to counter piracy are few in number and grossly inadequate for the task of patrolling the whole of the Indian Ocean. There is at present no co-ordinated approach. As a result, pirates are often captured only to be fed and returned to Somalia, free to go back to their old work of piracy.

Combine efforts

If international forces are to co-ordinate in order effectively to tackle piracy in the long term, I believe that they must combine their efforts into a UN naval task force. This force could then concentrate on patrolling the coast
of Somalia, from where the vast majority of the pirates emerge. I hope that we will all be surprised by the effect that could be brought about by such a force monitoring all small vessels leaving Somalia’s coastline to ensure they were genuine fishing vessels.

With that in mind, I have used my position as a permanent member of the IMO to force the issue. I had intended to move a resolution at the IMO for this purpose, but I will not now do so, as the outgoing secretary general of the IMO has informed me that he himself with be moving this resolution. At the IMO’s GeneralMeeting in November, I was hoping to contribute to the pressure that will be required to create a Naval task force that may be able to save many lives, as well as a lot of money, by taking control of the Indian Ocean back from the pirates.

Short of the creation of a UN naval taskforce, it is not going to be practical to control the plague of piracy. The Somali pirates are effectively the same as any other terrorist. The only difference is that while international terrorists have so far indulged in acts of terrorism for the sake of their professed political causes, Somalia’s pirates indulge in terrorism only to fill their own pockets.

Arming ocean going vessels will go some way towards dealing with pirates, but for this course of action to work, many obstacles must be overcome. For example, Egypt will not allow vessels passing through the Suez Canal to carry on board guns and ammunition (since believed to have been reversed).

What also is of concern is the growing ‘industry’ around piracy. The total loss to the international trade community on account of piracy in 2011, thus far, is estimated to be $2 bill. Out of this total, only about $110 mill represents ransom paid to the pirates, just over 1% of the total loss. The rest of the loss is mainly represented by increased insurance premiums, the cost of adapting ships to higher security standards and payments made to the specialist security companies, which have sprung up to deal with piracy.

Sarosh Zaiwalla

Senior Partner of Zaiwalla & Co Solicitors & Permanent Representative to IMO