UK: Bill Of Lading "Law And Arbitration" Clause Incorporates Charterparty Court Jurisdiction Provision

Caresse Navigation Ltd v. Zurich Assurances MAROC and others (Channel Ranger)

[2014] EWCA Civ 1366

The Court of Appeal in this case has considered whether reference in a bill of lading to the incorporation of a "law and arbitration clause" was effective to incorporate a law and court jurisdiction (not arbitration) clause in a charterparty. This dispute concerns a claim for cargo damage of around US$ 1 million under a bill of lading on the Congenbill 1994 standard form. The appeal was against a Commercial Court decision upholding an anti-suit injunction made on the basis that the bill of lading did incorporate an English law and court jurisdiction clause referred to in the charterparty. The Court of Appeal dismissed the appeal and upheld the Commercial Court's decision.

The background facts

The Respondent Owners commenced proceedings in the English Commercial Court seeking a declaration of non-liability regarding salt-water damage to the cargo at the discharge port in Morocco. The cargo insurers (appellants in the current proceedings) challenged the English Court's jurisdiction and commenced proceedings in Morocco against the Owners in relation to the cargo damage.

The Owners were granted an anti-suit injunction by the Commercial Court restraining pursuit of the Moroccan proceedings by the cargo insurers.

The Congenbill 1994 bill of lading contained the following typed clause: "All terms, conditions, liberties and exemptions including the law and arbitration clause, are herewith incorporated." The terms of the governing voyage charterparty, however, provided that it would be governed by the exclusive jurisdiction of the English courts and did not provide for arbitration.

The Commercial Court decision

The Commercial Court held that the provision in the bill of lading expressly seeking to incorporate an arbitration clause from the charterparty was sufficient to incorporate the English High Court jurisdiction clause in that charterparty. The Court took the view that this issue was one of construction of the terms of the contract, rather than one of incorporation, and that the real question was what the parties reasonably understood by the words "law and arbitration clause". The Court held that the only clause that the parties could have intended to refer to by the words "law and arbitration clause" was the court jurisdiction clause in the relevant charterparty, rather than to incorporate an arbitration clause "if any". Construing the clause in this way did not offend against the need for clarity and certainty in the construction of these types of clauses.

The Commercial Court therefore held that the Defendant cargo insurers were bound by the English court jurisdiction clause in the charterparty and granted the anti-suit injunction to restrain the proceedings that the Defendants had commenced in Morocco.

The cargo insurers appealed the Commercial Court's decision to the Court of Appeal.

The Court of Appeal decision

The Court of Appeal agreed with the Commercial Court's reasons and dismissed the appeal. The Court reiterated the Commercial Court's view that the question in this case is not one of incorporation of terms but of construing the meaning of the words used in the bill of lading. In addition, the words in the bill of lading must be read as a whole in their context. The argument put forward by the appellant cargo insurers that the meaning of the words in the bill of lading is "arbitration clause if any" was found to be wholly uncommercial since the original parties to the bill of lading are taken to have known of the terms of the charterparty and that it did not contain an arbitration clause. The reference to an arbitration clause in the bill of lading was therefore not inconsistent with the incorporation of the charterparty court jurisdiction clause. The Court of Appeal confirmed that, in its view, this finding did not run contrary to the need for clarity and certainty when incorporating terms into bills of lading since the clause in the charterparty was one that was usual in the trade.

Notably, the Court of Appeal also referred to The Merak [1965] (relied upon by the appellant cargo insurers in the present case) in which the Court of Appeal by a majority found that they could not correct an error in the bill of lading terms which referred to the incorrect clause number of the arbitration clause in a charterparty. The Court of Appeal in the present case commented that the approach of the Court in The Merak to the interpretation of contractual terms was "old-fashioned and outdated". In view of subsequent important decisions on the construction of contracts, the Court suggested that if the same case were to be decided today, it is very likely that it would be decided differently.

Comment

English law has long recognised the principle that general words of incorporation in a bill of lading only incorporate those provisions in the charterparty that are directly relevant or "germane" to the shipment, carriage, discharge and delivery of the cargo, and not ancillary charterparty terms such as arbitration and jurisdiction clauses. This case falls outside this general principle since, rather than general words being used, there was a specific reference in the bill of lading to one kind of charterparty ancillary provision, being the "law and arbitration clause". This reference was sufficient to incorporate the charterparty court jurisdiction (rather than arbitration) clause since the terms used were usual in the shipping trade and it was clear that the parties were aware that there was no arbitration clause in the charterparty and therefore intended to incorporate the court jurisdiction clause.

This case is a further remainder that, for certainty and to avoid potential disputes, parties should use clear and specific words of incorporation in a bill of lading and as far as possible refer to the correct law and jurisdiction clause(s) in the appropriate charterparty.

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