Companhia Siderurgica Paulista (COSIPA), BLG's client, concluded a Gencon-form voyage charterparty with Fednav (disponent owner of the defendant vessel), for the carriage of steel coils from Brazil to the U.S.A. and Canada. The charter contained a New York arbitration clause. COSIPA undertook to load, stow and trim the cargo, and insisted on covering the coils with plastic sheeting. Because Fednav was concerned about possible condensation damage to the coils that might result from using the sheeting, COSIPA had issued before the voyage, a letter of indemnity to Fednav (LOI), undertaking to hold Fednav harmless against any such claims. Following discharge, T. Co. Metals, the cargo consignee, sued Fednav and the shipowner in personam and defendant ship in rem for condensation damage to the coils. The defendants, invoking subsect. 46(1) of the Marine Liability Act (MLA), sought to take third-party proceedings against COSIPA in the same Federal Court action, under the voyage charterparty and the LOI. COSIPA moved for an order staying the third party claim, in favour of either New York arbitration under the voyage charterparty or in the courts of Brazil, on grounds of forum non conveniens.
Both Prothonotary Morneau and (in appeal) Justice Scott of the Federal Court found that the LOI issued by COSIPA was, in fact, an amendment to the COSIPA-Fednav voyage charterparty and therefore subject to the New York arbitration clause of that charter. The Prothonotary nevertheless held that the voyage charterparty was a "contract for the carriage of goods by water" within the meaning of the MLA, subsect. 46(1). Therefore, because that contract provided for the discharge of the cargo in Canada, Fednav and the shipowner had the option of trying their third-party claim against COSIPA before the Federal Court in Canada. The Prothonotary also dismissed COSIPA's forum non conveniens motion, finding only three factors clearly favouring Brazil litigation. COSIPA appealed.
Justice Scott reversed the Prothonotary on the application of s. 46. Reading the term "contract for the carriage of goods by water" in its context and in light of the scheme of the MLA and the intention of Parliament, the court concluded that the MLA contemplated giving effect in Canada to the Hague/Visby Rules, while also adopting the Hamburg Rules with a view to their eventually replacing Hague/Visby. Both those international conventions excluded charter-parties, as long as the bills of lading issued under them were not negotiated to third parties, as was the case here, where the bills had remained in COSIPA's hands at all material times. In con-sequence, COSIPA's relationship with Fednav remained subject to the voyage charterparty alone, requiring the third-party proceedings under the charter and the LOI to be arbitrated in New York.
It was not logical to construe s. 46 of the MLA as granting more rights to sue in Canada than the Hamburg Rules themselves conferred. Enforcing the arbitration clause also reflected Canada's support for international arbitration agreements, pursuant to the New York Convention 1958.
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