Facts
Dampskibsselskabet Norden A/S, (Owners), entered into a voyage charterparty with Beach Building and Construction Group (of which Bowen Basin Coal Group forms a part), Australia, (the Charterers), dated 6 October 2009 (Charterparty) for the carriage of coal from Australia to China. A dispute arose under the Charterparty in respect of demurrage that had been incurred in the amount of US$824,663.18, (Dispute).
Pursuant to clause 32, the Charterparty was governed by English law and the Dispute was referred to London arbitration and the Owners commenced an arbitration against Beach Building & Civil Group Pty Ltd (BBCG).
At BBCG's request, the arbitrator agreed to determine two preliminary issues which were as follows:
- The identity/correct name of the charterer;
- The arbitrator's jurisdiction to hear an arbitration concerning a dispute arising out of a charterparty.
In respect of the identity of the charterer, BBCG contended that it was not a party to the Charterparty as it had not been named in the Charterparty and the correct party was the Charterers. Owners contended that they had intended to enter into the Charterparty with BBCG and would not have entered into the Charterparty with the Charterers. They claimed that the naming of the Charterers was a mistake and sought that the arbitrator rectify this mistake.
In respect of the arbitrator's jurisdiction, BBCG contended that clause 32 of the Charterparty was invalid and unenforceable pursuant to s.11 of the Australian Carriage of Goods by Sea Act 1991, (COGSA), as it sought to oust the jurisdiction of the Australian courts.
Owners were successful in the arbitration and obtained two arbitration awards in respect of the Dispute, (the Awards).
The first award was a Declaratory Arbitration Award which responded to the two preliminary issues and held:
- that the correct party to the Charterparty was Beach Building & Civil Group Pty Ltd, (BBCG), and the Charterers had been incorrectly named as Beach Building and Construction Group (of which Bowen Basin Coal Group forms a part), Australia. The award rectified the Charterparty to reflect this;
- that the arbitrator had jurisdiction to decide the Dispute between the parties.
The second award held that BBCG was to pay Owners the amount of the Dispute.
Owners sought to enforce the Awards against BBCG by registering them with the Federal Court of Australia, as BBCG is an Australian entity.
The Federal Court Decision: The preliminary issues raised in the arbitration were again raised by BBCG before Justice Foster in the Federal Court Proceedings, (the Proceedings), as grounds for resisting the enforcement of the Awards.
BBCG contended that it was not bound by the Awards as it was not named as a contracting party on the face of the Charterparty. Owners submitted that irrespective of this, it was the common intention of those who had negotiated the terms of the Charterparty that the charterers under the Charterparty would be BCCG. Justice Foster held that the evidence established that the Charterers had been mistakenly described in the Charterparty and this mistake could be remedied by construing the reference to "Beach Building and Construction Group" as a reference to BBCG.
In respect of the validity of the arbitration clause contained within the Charterparty, Justice Foster held that BBCG succeeded in establishing that the clause had no effect as it purported to preclude or limit the jurisdiction of Australian Courts. It was found that a voyage charterparty was a "sea carriage document" within the meaning of s.11 of COGSA as it was a non-negotiable document that related to the carriage of goods and s.11 of COGSA provides that any clause contained in a sea carriage document which attempts to limit or preclude the Australian Courts jurisdiction is void and of no effect.
Accordingly, the Awards were unenforceable pursuant to s.8(5)(b) of the International Arbitration Act 1974 (Cth).
This decision is contrary to the findings of the South Australian Supreme Court in Jebsens International Australia Pty Ltd v Interfert Australia Pty Ltd [2012] SASC 50 where the court held that a voyage charterparty was not a sea carriage document.
Conclusion
Parties that are involved in, or a claimant contemplating commencing, arbitration proceedings in relation to a voyage charterparty for the carriage of goods whereby they will seek to enforce an award in Australia, should carefully consider this judgment and consider commencing proceedings in the Australian courts rather than by way of international arbitration outside Australia.
It remains to be seen whether the recent case will be appealed.
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