ENERGYEN v HYUNDAI: Who can commence arbitration after universal or partial succession?

Background

Pursuant to a supply contract signed in 2014, Energyen Corporation (“Energyen”) agreed to supply feed water heaters to Hyundai Heavy Industries Co Ltd (“Original HHI”) (“Supply Contract”) for use in the construction of a power plant in Saudi Arabia.

In 2019, Original HHI sent to Energyen a notice explaining Original HHI’s plan to “spin-off” the company pursuant to a restructuring process under Korean law (“Spin-Off Plan”) and establish a new Hyundai Heavy Industries Co Ltd (“New HHI”).  Original HHI was to be renamed as “Korea Shipbuilding and Offshore Engineering” and function as a holding company with only management and investment functions.  

Disputes arose under the Supply Contract between Energyen and Original HHI/New HHI and those were referred to ICC arbitration. The final award rendered thereunder found in favour of New HHI. 

That corporate restructuring of Original HHI formed the basis of Energyen’s legal challenge before the Commercial High Court. Energyen argued that the ICC tribunal lacked jurisdiction to make the award in favour of New HHI for the following reasons:

1. It was Original HHI which was and remained party to the supply contract and the arbitration agreement.
2. It was Original HHI which commenced the arbitral reference.
3. The steps which it said are necessary under English law for a transferee from an original party to an arbitration agreement to be able to assert the right to arbitrate were not taken. 

Decision

The effect of the spin off plan

The key dispute under the Korean restructuring was whether it had been effective under Korean law to transfer the contract to New HHI, and whether under English law that partial succession would be recognised without any assignment, novation or notice.   

On the first point, Foxton J concluded that the objective interpretation of the Spin-Off Plan was clear and its effect was that all contracts which had been entered into by Original HHI were succeeded to by New HHI. 

On the second point, Foxton J had to consider a number of authorities which dealt with the concept of universal succession, mostly in arbitrations arising out of German company mergers.  In relation to universal succession, English law will effectively recognise the effect under the law of the company’s domicile.  In this case, Korean law provided that a Spin-off meant that the new company comprehensively succeeded to all rights that had been spun-off.

Counsel for Energyen attempted to distinguish the position on the basis that the reported cases arose from mergers, not restructuring or divestments, and also dealt with “universal succession”.  The specific scenario here had not been specifically addressed, but Foxton J saw no reason why the same approach should not be adopted.  New HHI had therefore succeeded to all rights of Original HHI in relation to the Energyen Contract, with no requirement for notice to Energyen, or any other “English law” document of transfer such as an assignment.

Who commenced the arbitration?

Under English law this issue falls to be determined objectively by asking “who would reasonably have been understood by the party against whom the claim was asserted to be bringing the claim?” (SEB Trygg Holding AB v Manches [2005] EWCA Civ 1237). 

The judge’s determination as to the effect of the Spin-Off Plan was that the rights being asserted in the request for arbitration to the ICC (“RFA”) were the rights of New HHI, not Original HHI and it must have been obvious to Energyen that the RFA was being served by New HHI to enforce the Supply Contract at the relevant time. 

That point was further put beyond doubt by the notice that was sent to Energyen in 2019. That was despite the RFA containing a minor inaccuracy in referring to the arbitral claimant as having been founded in 1972 (which was when Original HHI was founded) – as to that, the Judge did note that that was in substance true as so far as the Supply Contract was concerned, per the views of both Korean experts, New HHI had “a status identical or equivalent to the former company”.

Was the arbitration validly commenced?

Energyen submitted that the RFA had been defective for two reasons. Firstly, it failed to specify the basis on which claims are made (Article 4(3)(c) ICC Rules) because Energyen argued that the arbitration was brought pursuant to the Spin-Off. Secondly, because it failed to attach any relevant agreements, in particular, the Spin-Off Plan itself. 

As to the first argument, Article 4(3) of the ICC Rules sets out an eight-point list of information that the ‘request’ should contain. It was surprisingly difficult to find clear guidance as to what the consequence of non-compliance with these would be. 

After reviewing the available guidance material, the judge concluded that not every aspect of Article 4(3) creates a jurisdictional requirement such that alleged non-compliance would provide a jurisdictional objection to the validity of any resultant award for the purposes of ss. 30(1) and 67 of the Arbitration Act 1996.

In any event, it was noted that the Spin-Off Plan was not in fact an agreement but a unilateral legal act by the company effecting the spin-off which has legal effect under the legislation of its place of incorporation. Energyen’s argument failed because, pursuant to the succession of rights, New HHI in fact correctly commenced arbitration pursuant to the Supply Contract.

Commentary 

The judgment provides a useful caution to parties commencing arbitration following a merger or restructuring to include a short note on that process in the arbitration itself.  While this case shows it is not in fact necessary, the appeal process could have been avoided entirely had the Spin-off been made clear at the start of the process.  In most cases there will be less confusion as to the parties, which arose here because New HHI took the name of Original HHI, and it was Original HHI that changed names. 

This is however a noteworthy decision with respect to issues of “partial succession” which now fit seamlessly into the wealth of authorities decided in the context of “universal succession”. That should provide considerable comfort to international companies seeking to bring claims under English law after restructuring in their country of domicile.

It serves as another reminder that the identification of the correct parties to an arbitration is not to be taken lightly and parties should remain diligent to this, not only at the outset of proceedings, but also during the life of the same as the implications could be unexpected and costly. That is especially so in the context of large international construction projects where great sums are often at stake. 

It is also noteworthy that during the hearing Energyen had also challenged that the Award was affected by a serious irregularity which had caused them substantial injustice, namely fraud for the purpose of s68(2)(g) of the Arbitration Act 1996 on the basis that New HHI had induced the Tribunal into issuing an Award in the wrong name. That challenge was swiftly withdrawn by Energyen during the hearing following the judge’s reminder that allegations of fraud are not to be made lightly. For the purpose of s68(2)(g), “it is not enough to show that a party inadvertently misled another, however carelessly”, and the usual requirements for alleging and establishing fraud apply.

Tom Kelly, Hyun Woo Thomson-Kang and Caitlyn Gomez of Preston Turnbull LLP acted for the successful Respondents, HD KSOE and HD HHI in this legal challenge, instructing Gemma Morgan of Quadrant Chambers as Counsel for the Respondents.

Full judgment here: https://www.bailii.org/ew/cases/EWHC/Comm/2025/1586.html