Caresse Navigation Ltd v Office National De L'electricite & Ors [2013] EWHC 3081 (Comm)

[2013] EWHC 3081 (Comm)Case No 2011 Folio 668
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 14/10/2013
Before
THE HONOURABLE MR JUSTICE MALES
Between
CARESSE NAVIGATION LTDClaimant(1) OFFICE NATIONAL DE L’ELECTRICITEDefendants(2) ZURICH ASSURANCES MAROCDefendant(3) ZURICH COMPAGNIE MAROCAINE D’ASSURANCESDefendant(4) WAFA ASSURANCEDefendant(5) AXA ASSURANCE MAROCDefendant(6) ATLANTA (an insurance company)Defendant
Mr Henry Byam-Cook (instructed by Holman Fenwick Willan LLP) for ClaimantMr Tom Whitehead (instructed by Hill Dickinson LLP) for DefendantsHearing Hearing dates: 4 th October 2013
JudgmentMr Justice Males :Introduction
[1]The main issue raised by this application concerns the effect of the incorporation into a bill of lading of the “Law and Arbitration clause” of an identified charterparty when the dispute resolution clause in that charterparty provides, not for English law and arbitration, but for English law and court jurisdiction. Two main questions arise:(i) should the clause be read as providing for the jurisdiction of this court and(ii) is there in any event an effective choice of English law as the law applicable to the bill of lading?[2]These questions arise on a challenge by the defendants to the jurisdiction of this court pursuant to CPR 11, permission to serve the first defendant (the receiver of the cargo) out of the jurisdiction in Morocco having been given by Hamblen J, the jurisdictional gateways relied on by the claimant shipowners being that the bill of lading contract(i) is governed by English law and(ii) contains a term to the effect that the court shall have jurisdiction. Subsequent orders made by Blair J and HHJ Mackie QC joined the second to sixth defendants (the insurers of the cargo) to the action and extended the time for service.[3]There was also listed before me an application by the claimant owners for an anti-suit injunction to restrain the further pursuit of proceedings commenced by the defendant insurers in Morocco, but the claimant agreed at the hearing that this should be deferred until after I had determined whether the English court has jurisdiction and, if so, on what basis. The defendants made clear that, at this stage, they intend to play no part in responding to that application, lest it be said that by doing so they have submitted to the jurisdiction of this court.

The parties

[4]The claimant, a Marshall Islands company, was and still is the owner of the vessel “CHANNEL RANGER” and was the contractual carrier of the cargo on the subject voyage under the relevant bill of lading. The first defendant, a Moroccan state electricity generating company, was the receiver of the cargo. The second to sixth defendants were the insurers of the cargo. Under Moroccan law, whatever rights of suit under the bill of lading have passed to the receiver can be exercised by the cargo insurers, so that they can now bring a claim under the bill of lading in respect of cargo damage in their own name. It transpires that the third defendant is in fact the same company as the second defendant. Accordingly, the claimant accepts that the third defendant need no longer be named as a defendant to the proceedings.

Background

[5]By a contract on an amended NYPE form dated 23 March 2011 the claimant chartered the vessel to U-Sea Bulk A/S for one time charter trip with a cargo of “coal in bulk”. It appears that U-Sea concluded this charter in order to perform one of three shipments which it had agreed to perform under a voyage charter contract with Glencore International AG dated 6 January 2011 (“the voyage charter”).[6]The voyage charter between U-Sea and Glencore was in the form of an e-mail fixture recap (as is not uncommon, it seems that no formal charterparty was ever drawn up), which set out the main terms agreed and concluded:
“otherwise as per proforma C/P Glencore/Eitzen latest C/P dated 14 January 2009 (see attached) logically amended as per main terms agreed.”
[7]The Glencore/Eitzen charter dated 14 January 2009 was an attachment to this e-mail. It was on the Americanised Welsh Coal Charter (“Amwelsh”) form 1979. Clause 5 of this printed form provided:
“This Charter Party shall be governed by English law, and any dispute arising out of or in connection with this Charter shall be submitted to the exclusive jurisdiction of the High Court of Justice of England and Wales.”
[8]The vessel arrived at Rotterdam on 1 April 2011 and loaded 39,001.503 mt of cargo between 4 and 6 April 2011. Shipment of the cargo on board the vessel was acknowledged by a bill of lading dated 6 April 2011, signed on behalf of the master by the local agents and stating that the cargo was "shipped in apparent good order and condition". The bill named Glencore as the shipper and was consigned to the order of the first defendant. It was therefore a negotiable bill, which took effect as a contract between the claimant shipowners and Glencore. The port of discharge was Nador in Morocco.[9]The bill of lading was on the well-known “Congenbill 1994” form which states on its face that it is "to be used with charter-parties". The form includes a box on the front in which the printed words "Freight payable as per CHARTER-PARTY dated …” appear, while on the reverse clause 1 of the conditions of carriage provides that: “All terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf, including the Law and Arbitration Clause, are herewith incorporated."[10]Clause 2 of the printed terms, a General Paramount clause, provides for the Hague or Hague-Visby Rules (in this case, the latter) to apply to the bill of lading contract.[11]In the present case, the box on the front of the form referring to payment of freight was completed by the insertion of the date of the voyage charter, 6 January 2011. Further, the central box on the front of the form also included the typed clause: “Freight payable as per Charter Party. All terms, conditions, liberties and exemptions including the law and arbitration clause, are herewith incorporated."[12]The vessel sailed from Rotterdam on 6 April 2011. It is the owners' case, and so far at any rate has not been disputed by the defendants, that at no time prior to loading or during loading itself did Glencore, the shipper, or its appointed agent provide any information to the master regarding the characteristics of the cargo and the recommended safe handling procedures for its loading and transportation. In particular, no warning was given to the master that the cargo to be carried was liable to self-heat.[13]The vessel arrived at Nador on 11 April 2011 after a voyage of only five days and berthed on 12 April 2011, at which time the temperature of the cargo was noted to have increased. According to the owners, the following days were characterised by delays in the commencement and progress of discharge, the effect of which was that the self-heating of the cargo in three of the vessel’s five holds worsened, with a small hot spot being found in hold 2 on the evening of 15 April 2011. This had increased in size by the following day.[14]By this stage, the owners had instructed a surveyor, Dr Daniel Sheard of Brookes Bell, to attend on board the vessel to monitor the situation and provide expert assistance to the master. U-Sea had also instructed its own expert, Mr Graham Charlton, from Burgoynes. Due to the elevated temperatures in hold 2 and the risk of flammable gas evolution, the master, Dr Sheard, Mr Charlton and a representative from the harbour master considered that the hotspot in hold 2 should be doused with water as an emergency measure to preserve the safety of the vessel, the rest of the cargo and those on board.[15]There is a dispute as to what this dousing consisted of. The owners say that there was dousing of the hot spot in hold 2, initially with fresh water but then, because there was not a sufficient supply of fresh water, with salt water for a period of no more than about seven minutes; and that on the following day there was further dousing, this time with fresh water only. The receivers, however, say that the use of salt water was more extensive and that, even though fresh water was available, there was dousing by salt water in holds 2, 4 and 5 which caused contamination of the cargo and rendered it unusable for their purposes, namely use in industrial boilers for the production of electricity.[16]Discharge operations were interrupted on 18 April 2011, when the vessel was arrested by the receivers. That arrest was lifted on 20 April 2011 in exchange for a P & I Club letter of undertaking. Cargo operations resumed on 21 April 2011 and discharge was completed on 23 April 2011. The vessel sailed from the port on 24 April 2011.[17]The P & I Club letter of undertaking was substituted by a bank guarantee dated 29 April 2011 from Banque Marocaine du Commerce Exterieur given on behalf of the club in favour of the first and second defendants. It states that it was issued to secure payment of any sums payable by the owners in respect of “the alleged damage to the cargo of coal discharged from the said vessel on arrival at Nador on 11.04.2011, caused by combustion and fire-extinguishing water” and is for a maximum sum of 9,500,000 Moroccan Dirhams (equivalent to about US$1,181,000).[18]The defendants rely on a survey report from TEXA, local surveyors who attended on board the vessel during certain periods of the discharge operation, but who may not have been present on board when the crew doused the cargo at the discharge port. There is an issue about this. Nonetheless, the surveyor concludes “7,266.243 mt of steam coal imported by the ONE, damaged by contamination following its dousing by seawater in the holds of the vessel. This dousing was undertaken by the employees of the shipowner, while the ship was berthed, even though freshwater was immediately available. There was thus damage to the actual coal by the sodium chloride contained in seawater”.

The proceedings

[19]The claim form in this action seeking a declaration of non-liability was issued on 8 June 2011. The first defendant has been aware of the English proceedings since 21 June 2011, but there were delays in serving the proceedings on the defendants in Morocco. Service was eventually effected on the insurer defendants on dates in February 2013 and on the first defendant on 6 May 2013.[20]A month after service upon them, on 28 March 2013, the insurer defendants (exercising their right under Moroccan law to sue in their own names) commenced proceedings in the Commercial Court in Casablanca against(i) the master, in his capacity as representative of the owners, and(ii) the port operating company. The claim against the owners is made pursuant to the Hamburg Rules (which apply in Morocco) and relies simply on the fact that the cargo was damaged on outturn. The basis on which it is sought to hold the port operating company responsible is not explained. Apparently there is no difficulty as a matter of Moroccan law in serving the claim on the owners by service on their port agents but (more than six months after commencement of the proceedings) such service had not been effected as at the date of the hearing before me.[21]By an application dated 22 May 2013 the defendants challenge the jurisdiction of this court. On 13 August 2013 the claimant owners issued an application for an anti-suit injunction to restrain pursuit of the Moroccan proceedings on the ground that this constitutes a breach of the exclusive jurisdiction clause in the charter party which (they say) was incorporated into the bill of lading.

The tests for jurisdiction

[22]Save in one respect the proper approach to the questions whether the court has and/or should exercise jurisdiction was not in dispute.[23]The court has a discretionary power under CPR 6.36 and 6.37 to grant permission to serve a claim form out of the jurisdiction if the following conditions are met, on all of which the burden lies upon the claimant: i) the claimant has a good arguable case that the claim comes within one or more of the jurisdictional gateways set out in CPR PD 6B para 3.1; ii) the claim has a reasonable prospect of success on the merits; and iii) the court is satisfied that England and Wales is the proper place in which to bring the claim.[24]The standard of a good arguable case is less stringent than proof on the balance of probabilities but is higher than the test of serious issue to be tried. It involves considering the relative strengths of the arguments in the light of the material available, bearing in mind the limitations of the interlocutory process. For this reason, it is often glossed by saying that the claimant must show that it has much the better, or at any rate the better, of the argument.[25]The standard in relation to the second condition is akin to the standard on a summary judgment application under CPR 24. It is therefore a relatively low hurdle for a claimant, who must have a real as opposed to a fanciful prospect of success. The cases are replete with warnings against attempting to conduct anything in the nature of a mini trial on the merits.[26]As for the third condition, it must be shown that England is clearly the appropriate forum for the resolution of the claims.[27]The point on which the parties disagree is whether or to what extent it is legitimate on an inter partes hearing to take account of events occurring after the initial grant of permission to serve out. This point arises because the defendants contend that the existence of the Moroccan proceedings is an important factor on the question of appropriate forum. The claimant owners say that where permission to serve out has been granted on a without noticebasis and that permission is subsequently challenged by the defendant, the proper approach is for the court to exercise its discretion afresh on the basis of all the evidence now before it, but that it cannot take into account events which have only occurred since the grant of permission. The logic of this position is that the question whether the original permission ought to have been granted cannot be affected by matters only occurring thereafter: Briggs & Rees, Civil Jurisdiction and Judgments, (5th Edition, 2009) para 5.28. They accept, however, that such subsequent events may be taken into account, once it is established that the court has jurisdiction, on an application by the defendants that such jurisdiction should not be exercised on forum non conveniens grounds, but contend that on such an application it would be the defendants who would bear the burden. As I shall explain, this case does not depend on whether or at what stage of the argument I am permitted to take account of the existence of the Moroccan proceedings, or on the burden of proof, and I therefore need not determine this question.

Jurisdictional gateways

[28]The claimant shipowners invoke two of the jurisdictional gateways in para 3.1(6) of CPR PD 6B. These are, first that the bill of lading is a contract "governed by English law", and second that the bill “contains a term to the effect that the court shall have jurisdiction to determine any claim in respect of the contract”. These depend, in both cases, on the effect of the incorporation of the charterparty into the bill of lading. As already noted, in order to pass through these gateways, a claimant is only required to show that it has a good arguable case. Mr Henry Byam-Cook for the claimant shipowners urged me to apply that test and to go no further. Mr Tom Whitehead for the defendants, however, urged me to decide one way or the other whether the bill of lading does contain a term conferring jurisdiction on the English court and not merely whether there is a good arguable case to this effect. He suggested that it would be critical to the exercise of discretion to know by which (if either) of the jurisdictional gateways relied on the owners had succeeded in establishing jurisdiction (as no separate consideration of appropriate forum will arise if there is an exclusive jurisdiction clause) and also cited [81] of the judgment of the Privy Council given by Lord Collins of Mapesbury in Altimo Holdings & Investment Ltd v Kyrgyz Mobil Tel Ltd [2011] UKPC 7, [2012] 1 WLR 1804:
“A question of law can arise on an application in connection with service out of the jurisdiction, and, if the question of law goes to the existence of jurisdiction, the court will normally decide it, rather than treating it as a question of whether there is a good arguable case: E F Hutton & Co (London) v Mofarrij [1989] 1 WLR 488, 495; Chellaram v Chellaram (No 2) [2002] 3 All ER 17, para 136.”
[29]The question whether the bill of lading contains a term providing for English court jurisdiction is a question of law. Neither party suggested that there are additional facts relevant to that question which are not currently in evidence. It has been fully argued and, as well as affecting the issue of jurisdiction, will in due course be relevant to (and potentially determinative of) the owners’ application for an anti-suit injunction. Moreover, the question would not arise for decision at any trial (since, ex hypothesi, by the stage of a trial the court would have decided to exercise jurisdiction). For these reasons I accept Mr Whitehead's submission that the point should be decided now.

Governing law

[30]I begin, however, with the question of the governing law of the bill of lading. The governing law of a contract must be determined in accordance with the provisions of the Rome I Regulation (Regulation (EC) 593/2008), which provides in Article 3(1) that:
“A contract shall be governed by the law chosen by the parties. The choice shall be made expressly or clearly demonstrated by the terms of the contract or the circumstances of the case. By their choice the parties can select the law applicable to the whole or part only of the contract.”
[31]Mr Byam-Cook submitted that whatever the effect of the words "and arbitration" in the typed clause on the face of the bill of lading and in clause 1 of the printed term on the reverse, these clauses constitute a clear choice of English law as the law to govern the bill of lading contact. In particular, he submitted that: i) Although different considerations may apply with regard to the incorporation of jurisdiction or arbitration clauses, general words of incorporation are sufficient to incorporate a charterparty governing law provision into a bill of lading: The Njegos [1936] P 90 and The San Nicholas [1976] 1 Lloyd’s Rep 8. In such circumstances, a degree of verbal manipulation of the incorporated clause is allowed: Aikens, Bills of Lading (2006) para 7.91 and 7.99. ii) In any event, the bill contains two express and specific references to the proper law clause in the voyage charter, which are more than sufficient to incorporate that choice of law into the bill of lading. iii) This amounts to an express choice of English law for the purposes of the Rome I Regulation: Aikens, Bills of Lading para 14.10.[32]Mr Whitehead submitted that the bill contained no express choice of English law and that in accordance with Article 5(1) of the Rome I Regulation, which deals with contracts of carriage, the governing law is the law of Morocco as the agreed place of delivery. Article 5(1), however, applies only "to the extent that the law applicable to a contract for the carriage of goods has not been chosen in accordance with Article 3”. The question for decision, therefore, is whether there was such a choice. Mr Whitehead submitted that there was not, because(i) a consignee is entitled to know with precision from the face of the bill of lading what law if any has been chosen,(ii) the terms of the voyage charter were not known to the receivers until after the dispute arose, and(iii) the parties to the bill of lading did not contract with knowledge of the choice of law clause in the charterparty.[33]In my judgment it is important to remember that the bill of lading is a contract concluded between the owners and the shipper of the cargo, in this case Glencore. The consignee, although named in the bill, is not a party to the contract although it may become a holder of the bill and, by that means, may acquire rights of suit against the owners. On the other hand, it may not -- for example, if for whatever reason it declines to take up and pay for the shipping documents when they are tendered under its purchase contract. In determining whether the parties to the contract have chosen a governing law for the purpose of Article 3, what matters is the choice if any made by the original parties to the contract. In construing the bill of lading in order to ascertain whether they have made such a choice, it is relevant to take account of the fact that the bill is negotiable and may come into the hands of parties who have no means of knowledge of the terms of any charterparty referred to, but the question remains a question of construction of the contract between the original parties thereto.[34]I accept Mr Byam-Cook’s submission that general words of incorporation are sufficient to incorporate a proper law clause, or at any rate that there is at least a good arguable case that this is so. It was so held in The San Nicholas [1976] 1 Lloyd’s Rep 8, where Lord Denning MR said (omitting citations, in a judgment with which Roskill and Ormrod LJJ agreed):
“The only remaining question is whether the incorporation includes the clause saying that the contract ‘shall be governed by the laws of England’. It is settled that an arbitration clause is not incorporated … But the clause which defines the proper law of the contract is incorporated … So this bill of lading is governed by the laws of England. At any rate, there is a good arguable case that the contract sued upon is expressly or impliedly governed by English law.”
[35]One of the cases cited by Lord Denning was The Njegos [1936] P 90, where the charterparty was held to be governed by English law principally because it provided for arbitration in London. It was held that general words of incorporation were not sufficient to incorporate the charterparty arbitration clause into the bill of lading, but that the incorporation of charterparty terms which (in part because of the arbitration clause) were themselves governed by English law nevertheless demonstrated a choice of English law to govern the bill of lading contract.[36]In addition, in the present case, whatever the effect of the words "and arbitration” in the bill of lading clauses, in my judgment the express references to the governing law of the charterparty amount to an irrefutable case that the parties to the bill of lading intended their contract to be governed by the same law as was applicable to the charterparty, at any rate provided that the law so chosen was usual and proper for the trade. Since the Amwelsh form is a commonly used charter form for the carriage of coal, there was nothing surprising or unusual about the choice of English law, which is what the printed form provides, and no reason why this common form of bill of lading should not be transferred to a consignee who (upon becoming a holder of the bill) would succeed to the rights contained therein, which rights were subject to English law.[37]I conclude, therefore, that for the purpose of passing through this jurisdictional gateway the owners have a good arguable case that the bill of lading is a contract governed by English law. I would go further and say that when it comes to the exercise of discretion (considered below), that discretion will fall to be exercised on the basis that the owners have an extremely strong case that the bill of lading is subject to an express choice of English law.

The jurisdiction clause

[38]For over a century special rules have applied to the incorporation of charterparty arbitration clauses into bills of lading. As Bingham LJ observed in The Federal Bulker [1989] 1 Lloyd’s Rep 103, these rules were developed because of the negotiable nature of bills of lading which means that they may come into the hands of a foreign party with no knowledge or ready means of knowledge of the charterparty terms, and they have been defended by the courts with some tenacity in view of the interests of commercial certainty. A valuable summary was given by Gross J in Siboti K/S v BP France SA [2003] EWHC 1278 (Comm), [2003] 2 Lloyd’s Rep 364 at [24], in a judgment which also held that these rules apply equally to jurisdiction clauses as to arbitration clauses. As there was no dispute before me about these rules, it is sufficient for present purposes to say that general words of incorporation (however wide, and whether or not including the word "whatsoever") will not be effective to incorporate an arbitration (or jurisdiction) clause because such clauses are "ancillary" to the main contract to which they relate, but that specific reference to an arbitration (or jurisdiction) clause will be effective; and that, providing there is such a specific reference demonstrating an intention to arbitrate, it does not matter that the wording of the charterparty arbitration clause may require some degree of verbal manipulation in order to make it applicable to the bill of lading (for example, because it refers to disputes between owners and charterers): see eg The Delos [2001] 1 Lloyd’s Rep 703.[39]Applying these rules, it was common ground before me that if the charterparty had contained an arbitration clause (which I would qualify by saying, an arbitration clause usual in the trade), that would have been effectively incorporated into the bill of lading. But of course it did not. The bill of lading incorporated the charterparty "law and arbitration” clause, but the charterparty provided for English law and jurisdiction, rather than for English law and arbitration.[40]In those circumstances Mr Byam-Cook for the owners submitted that the specific incorporating words of the bill of lading (which included typed words on the face of the bill to which it was important to give meaning and effect: see The Starsin [2003] UKHL 12, [2004] 1 AC 715) demonstrated an intention to incorporate the charterparty dispute resolution clause, and could only refer to clause 5 of the charterparty providing for English law and court jurisdiction. He submitted that where as here the bill of lading contained specific words of incorporation, there was no need to give those words a strict construction, and that if it was clear that the parties had made a mistake (by referring to “arbitration" when they clearly meant "jurisdiction"), the bill of lading contract could be read in accordance with what a reasonable person would have understood them to have meant (see Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101).[41]Mr Whitehead for the receiver and insurers, however, submitted that the rules about incorporation give effect to the need for clarity and certainty, that arbitration is (and is well understood to be) different from litigation in court for a variety of important reasons (privacy, flexible procedures, parties' choice of tribunal which may include members with special expertise, ease of enforcement of awards, etc), that there is no reason to suppose that the parties made a mistake in referring to arbitration, and that effect would be given to the words of incorporation by construing them to mean that the charterparty arbitration clause "if any" would be incorporated.[42]I accept that there is a need for clarity and certainty in this area, and that arbitration and litigation are (or at least can be) very different. Indeed parties sometimes choose to arbitrate precisely because they do not want their disputes to go to court. I accept also Mr Whitehead’s submission that the typed words in the central box on the face of the bill (“Freight payable as per Charter Party. All terms, conditions, liberties and exemptions including the law and arbitration clause, are herewith incorporated”) appear to add nothing to the meaning of printed clause 1 on the reverse, when read together with the lower box dealing with payment of freight in which the date of the charterparty has been inserted. Even if that typed repetition adds a degree of emphasis, and notwithstanding the greater weight attaching to typed clauses than to standard printed conditions, I would be reluctant to conclude that these words make a critical difference in the present case.[43]Nevertheless, on balance I accept Mr Byam-Cook’s submissions. It seems to me that the question here is essentially one of construction rather than incorporation. Thus, although it can be posed by asking whether the jurisdiction clause in the charterparty is incorporated into the bill of lading, the real question is what the parties should reasonably be understood to have meant by the words "law and arbitration clause” which plainly contemplate the incorporation of at least one kind of ancillary clause. That is a question to be answered objectively, having regard to the background circumstances, which include the fact that the charterparty does not contain an arbitration clause, but does contain a law and jurisdiction clause. Special rules, to the effect that ancillary clauses will not be incorporated unless specific words are used, are of comparatively little weight in deciding whether specific words which are accepted to be effective to incorporate at least one kind of ancillary clause (an arbitration clause) can properly be read as extending also to another kind of ancillary clause.[44]It is clear, as Mr Byam-Cook submitted, that the only clause in the charterparty to which the parties could have intended their words to refer is the law and jurisdiction clause. There is no other candidate. That being so, it seems to me to be a more natural construction of the bill of lading to read it as referring to that clause, rather than to read it as referring to an arbitration clause in the charterparty “if any”. I can see no basis for adding the words "if any" into the bill of lading when the original parties to that contract either knew or must be taken to have known that the charterparty contained no such clause. That would render the specific incorporating words empty of content.[45]Accordingly, I accept Mr Byam-Cook’s submission that the principle stated by Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 at [25] applies here: “What is clear from these cases is that there is not, so to speak, a limit to the amount of red ink or verbal rearrangement or correction which the court is allowed. All that is required is that it should be clear that something has gone wrong with the language, and that it should be clear what a reasonable person would have understood the parties to have meant. In my opinion, both of these requirements are satisfied."[46]Does this conclusion run counter to the need for clarity and certainty, particularly bearing in mind that the bill may come into the hands of other parties (such as the receiver in this case) who are not aware of the terms of the charterparty? In my judgment it does not.[47]It is true that without reference to the charterparty, a consignee taking up and paying for the bill of lading cannot know in what forum any claim for breach of the bill of lading contact must be brought. But that would be true even if the charterparty provided for arbitration (in which case Mr Whitehead accepted that the consignee would be bound to arbitrate). The consignee could assume that the arbitration clause was one which was usual in the trade (if it was not, the consignee would not be bound by it), but it could not know without seeing the charterparty whether any arbitration was to be held in London or in some other city, whether the tribunal was to be a sole arbitrator or three arbitrators, and so on. In all these respects the consignee would be bound by whatever the original parties to the bill of lading had agreed by their incorporation of the charterparty arbitration clause. Indeed, the consignee would not necessarily know what governing law applied to the bill of lading contract.[48]None of this offends against the need for clarity and certainty. On the contrary, the consignee would know from the specific words of incorporation that the incorporation of charterparty terms was not confined to terms which were "germane to the shipment, carriage and delivery of the goods" (to use the phrase found in the authorities going back to Thomas & Co Ltd v Portsea Steamship Co Ltd [1912] AC 1) but extended to at least some ancillary clauses concerned with choice of law and dispute resolution. That being so, I conclude that the consignee is equally bound by a clause in the charterparty which can be identified as the clause which the parties to the bill of lading contract clearly had in mind when referring to the charterparty “law and arbitration clause”, at any rate provided that (as here) the clause in question is one which was usual in the trade.[49]I am reinforced in this conclusion by the decision of Gloster J in Y M Mars Tankers Ltd v Shield Petroleum (Nigeria) Ltd [2012] EWHC 2652 (Comm). That was a case involving a Congenbill form including the standard wording incorporating "the Law and Arbitration Clause” of the charterparty, but the charterparty in question included a clause, headed “Law and Litigation”, which provided for disputes involving an amount in excess of US $50,000 to be subject to the jurisdiction of the English court, while disputes involving lesser amounts were to go to arbitration in accordance with the LMAA Small Claims Procedure. The cargo receiver argued that the bill did not on its true construction provide for the jurisdiction of the English court over a claim for an amount in excess of US $50,000. Gloster J rejected this argument. She said at [30] that:
“In my judgment, the ‘Law and Arbitration Clause’ referred to in the Bill of Lading clearly should be, and would be, construed as a reference to the ‘Law and Litigation Clause’ in the Head Charterparty. It would be un-commercial to suggest that, simply because the ‘Law and Litigation Clause’ in the Head Charterparty provides that arbitration should be limited to disputes below a certain level, that somehow meant that only the arbitration provision should be carved out for the purpose of the Bill of Lading. The High Court provisions are all part of the same clause and scheme. It is absurd to suggest that once claims exceed a certain threshold, no jurisdictional provisions are incorporated.”
[50]While this case is not on all fours, because the "Law and Litigation” clause did at least contain some provision for arbitration, it demonstrates that the question for decision is a question of construction of the bill of lading and that at least in some circumstances a reference to "arbitration" in the bill of lading may properly be read as providing for court jurisdiction – indeed, it goes further by saying that in some circumstances any other conclusion would be “uncommercial” and "absurd".[51]I should mention one further argument. Mr Whitehead submitted that because the charterparty in this case takes the form of a fixture recap into which the terms of a previous charterparty between Glencore and Eitzen (a third party) were incorporated, this is what was described by Christopher Clarke J in Habas Sinai Ve Tibbi Gazlar Isthisal Endustri AS v Somatel Sal [2010] EWHC 29 (Comm), [2010] 1 Lloyd’s Rep 661 as a “two contract" case. He submitted that the jurisdiction clause in the Glencore/Eitzen charterparty was not even incorporated into the charter party dated 6 January 2011 between U-Sea and Glencore, and therefore could not have been incorporated into the bill of lading by a reference to that charterparty, however specific. That, said Mr Whitehead, was because the recap did not contain specific words of incorporation, but only the general words "otherwise as per proforma C/P Glencore/Eitzen … logically amended”.[52]Referring to the situation where parties make a contract incorporating terms agreed between one of them and a third party, Christopher Clarke J observed at [49] that:
“There is a particular need to be clear that the parties intended to incorporate the arbitration clause when the incorporation relied on is the incorporation of the terms of a contract made between different parties, even if one of them is a party to the contract in suit. In such a case it may not be evident that the parties intended not only to incorporate the substance of provisions of the other contract, but also provisions as to the resolution of disputes between different parties, particularly if a degree of verbal manipulation is needed for the incorporated arbitration clause to work. These considerations do not, however, apply to a single contract case.”
[53]I would respectfully agree that there is a need for clarity and that, depending on the circumstances, it may not be evident in such a case that the parties intend to incorporate a dispute resolution clause. Conversely, it may be evident that they do. The conclusion of a charterparty by means of a fixture recap together with the incorporation of terms from some earlier charter by means of wording such as "otherwise as per proforma … logically amended" is very common. In my judgment the parties to a charter concluded in this way do intend to incorporate the dispute resolution clause of the earlier charter thus identified. If, as generally happens, their contract is subsequently set out in a formal signed charterparty drawn up by the brokers, it will include that dispute resolution clause, but even if that does not happen (as is also common and as appears to be the present case) they still intend that clause to apply to disputes between them. The alternative would mean that their charter contains no dispute resolution clause at all, either for arbitration or for a specified court jurisdiction, which (if not unprecedented) would at least be extremely unusual. I have no doubt that the dispute resolution clause in the Glencore/Eitzen charterparty did form part of the charterparty between U-Sea and Glencore, which charterparty was in turn incorporated into the bill of lading. I suspect that, if a dispute were to arise between U-Sea and Glencore, those parties would be amazed to be told that the jurisdiction clause did not apply.[54]Accordingly I conclude that the bill of lading contained a term requiring any dispute to be submitted to the exclusive jurisdiction of the English court.

Reasonable prospect of success

[55]Mr Whitehead submitted that even if the owners passed through one or both of the jurisdictional gateways, nevertheless service should be set aside because their claim has no real prospect of success. He submitted that the owners have failed to explain what difference if any the shipper’s failure to tell the master about the characteristics of the cargo would have made and that it was incumbent on the owners to set out their case as to why they exercised due diligence to make the vessel seaworthy under Article III rule 1 of the Hague-Visby Rules and why they would be entitled to rely on any of the excepted perils in Article IV rule 2.[56]I have no doubt that there is a serious issue to be tried on the merits. Even leaving on one side the potential limitation issue referred to below, it is obvious from the evidence that the owners' case is that they were not responsible for the heating of the cargo – or, to break the issues down, that the vessel was not in any way unseaworthy, that the statement in the bill of lading that the cargo was shipped in "apparent" good order and condition gives rise to no prima facie case against them, that they are entitled to rely (for example) on various excepted perils, as well as on Article IV rule 6 which deals with the shipment of inflammable or dangerous cargoes, that the dousing of the cargo was entirely appropriate and in any event that it caused little or no salt water contamination. This case raises issues which can only be determined at trial. There are also issues, raised by the defendants, as to whether the master cared for the cargo properly during the voyage. If both parties were English, so that no question of jurisdiction arose, it is inconceivable that this would be regarded as a case for summary judgment.

Appropriate forum

[57]Mr Whitehead accepted that if the bill of lading was governed by English law and contained a term requiring any dispute to be submitted to the exclusive jurisdiction of the English court, that would in itself be sufficient to show that England is the appropriate forum. As that is what I have held, it would be possible to say at this point that the defendants’ challenge to the jurisdiction must be dismissed. However, as the point was argued, I will go on to deal with the issue of appropriate forum on the assumption that the jurisdiction clause does not apply and that the only gateway available to the owners is that the bill of lading is a contract governed by English law.[58]On that basis, Mr Byam-Cook submitted that the parties’ express choice of English law is entitled to substantial weight, in particular in circumstances where it is common ground that the Moroccan court would apply its own law, including the Hamburg Rules instead of the contractually agreed Hague-Visby regime. He submitted also that much of the evidence would be to do with events at the load port of Rotterdam or on the voyage and that the owners’ evidence, including evidence about events at the discharge port, would come from outside Morocco, with documents in English, English speaking witnesses and with experts from England who had attended at the discharge port.[59]Mr Whitehead, on the other hand, made three main points: first, that upholding English jurisdiction would involve a multiplicity of proceedings in view of the claim made by the insurers in Morocco, which also involved the port authority which had provided the stevedores; second, that the fact that the Moroccan court would apply Moroccan law is of no significance because it has not been shown that Moroccan law is relevantly different from English law, notwithstanding that the Hamburg Rules would apply; and third, that neither the events to be considered at trial nor the witnesses on either side have any connection with England, whereas to a very large extent they do with Morocco.[60]While there have been cases in which multiplicity of proceedings has been a decisive factor against English jurisdiction, I regard the existence of proceedings in Morocco in this case as being of no weight (and therefore need not consider further the issue about the extent to which I am permitted to take those proceedings into account). They were commenced only after the defendants were served with the present proceedings, and well after the receiver at any rate was aware of these proceedings. If this court was the appropriate forum at the time when permission was granted for service out of the jurisdiction, at which time the Moroccan proceedings did not exist, I do not see how the defendants’ own decision to bring proceedings in Morocco (ex hypothesi not the appropriate forum in the absence of those proceedings) can alter this assessment. If the existence of proceedings in two different jurisdictions is a problem for the defendants, they have the remedy in their own hands, namely to discontinue the proceedings in Morocco and contest the merits here. This view might require some reassessment if the insurers’ claim against the port authority had been explained, if for example there were valid claims against the port authority which needed to be brought in Morocco and could not conveniently be brought here, but in the absence of any such explanation the claim against the port authority has every appearance of being a makeweight, adding nothing of real substance to the claim against the owners and tacked onto the Moroccan proceedings in order to assist the defendants’ challenge to the jurisdiction here.[61]As for the significance of the express choice of English law, such a choice is capable of being a factor of significant and even decisive weight, particularly if the foreign court’s application of a different law would or might lead to a different result as that would be to deprive the claimant of the benefit of its bargain: The Lucky Lady [2013] EWHC 328 (Comm), [2013] 2 Lloyd’s Rep 104 at [28], where Andrew Smith J reviewed the applicable authorities, including the comments of Lord Mance in VTB Capital Plc v Nutritek International Corporation [2013] UKSC 5, [2013] 1 Lloyd’s Rep 466 at [46]. I do not overlook that the receiver did not choose English law as it was not an original party to the bill of lading contract, but for this purpose it stands in the shoes of the shipper who did.[62]In my judgment there is a real risk that forcing the owners to proceed in Morocco where Moroccan law and the Hamburg Rules would be applied would have the effect of depriving the owners of the benefit of their bargain. Mr Whitehead was able to point out that Article 13 of the Hamburg Rules is in substantially the same terms as Article IV rule 6 of the Hague-Visby Rules on which the owners rely, but to extrapolate from this to a conclusion that there is no relevant difference between English and Moroccan law so far as this claim is concerned is in my view not justified. Quite apart from the fact that at this early stage it is difficult to foresee the way in which the litigation may develop and the precise nature of the issues which may arise, there are myriad differences between the Hague-Visby and the Hamburg Rules, the latter being much more favourable to cargo interests (see the summary at Appendix VI of Scrutton on Charterparties (22nd Edition, 2011). In my judgment this risk of a less favourable legal regime in Morocco is a decisive factor.[63]I reach this conclusion leaving on one side the possibility that in England the owners may have a complete answer to any claim against them, and thus a straightforward basis on which they would be entitled to seek a declaration of non-liability, by reason of Article III rule 6 of the Hague-Visby Rules. That would arise because no claim was brought against them within 12 months of final discharge, so that it is at least arguable that any such claim thereupon ceased to exist: The Aries [1977] 1 WLR 185. However, although he drew this point to my attention after the hearing, this did not form part of Mr Byam-Cook’s argument at the hearing and I did not hear Mr Whitehead upon it. I will, therefore, say no more about it than that if it is a valid point, it would provide a further reason why justice would require that these proceedings take place in a forum which will apply the parties’ chosen law.[64]Finally on the question of appropriate forum, I would accept that such matters as the convenience of witnesses and the availability of evidence point more to Morocco than they do to England. But for the reasons I have given, such weight as these factors may have is less than that arising from the need to litigate in a forum which would apply English law as the law expressly chosen.[65]Accordingly, even if the jurisdiction clause does not apply, England is clearly the appropriate forum for this case.

Practical benefit

[66]Since the claim here is for a negative declaration, the claimant must also show that there is "a solid practical benefit" in proceedings here: see The Lucky Lady [2013] 2 Lloyd’s Rep 104 at [31]. I am satisfied that there is such a benefit, essentially for the same reasons as given by Andrew Smith J in that case at [34] to [38], that is to say (in outline) that a declaration may assist the owners to resist enforcement in a third country (to which I would add, that in this case it may also assist them to obtain the release of the security given by Banque Marocaine on behalf of their P & I Club), and that proceedings here may enable the owners to seek an anti-suit injunction (an application which they have indeed made, but with which I have not yet dealt).

Full and frank disclosure

[67]Mr Whitehead’s final argument was that there was a failure of full and frank disclosure in the application for permission to serve out of the jurisdiction because the evidence in support of that application did not deal sufficiently with the points which might be made by the defendants on the merits of the claim, did not expressly draw attention to the argument that the jurisdiction clause in the charter party was not incorporated because the bill of lading referred to “arbitration”, and did not grapple sufficiently with the question of appropriate forum. In addition it was said that in later applications to extend the time for service and to join the insurers as defendants, the owners failed to explain the issues raised by the TEXA report which, although exhibited, was not dealt with in any detail.[68]In my judgment there is nothing in these points. I do not read the owners’ witness statements as suggesting any more on the merits than that there was a serious issue to be tried on which they have a real prospect of success; the argument about the jurisdiction clause was obvious from what was said even if not spelt out; the question of appropriate forum did not arise for separate consideration if the owners were right (as I have held that they were) about the jurisdiction clause; and the TEXA report merely confirmed that issues would arise on the merits of the claim. In my judgment it cannot be said that the court was misled in any way or that an unfair picture was presented to it.

Conclusion

[69]Save that the name of the third defendant can be removed from the heading of these proceedings, the defendants’ challenge to the jurisdiction of this court is dismissed. The bill of lading provides for exclusive English jurisdiction and there is (at least) a good arguable case that it is governed by English law. There is a serious issue to be tried on the merits. Even if the bill contains no English jurisdiction clause, this court is clearly the appropriate forum and the proceedings serve a practical purpose. There was no failure of full and frank disclosure by the owners when seeking permission to serve out.[70]I will deal with the claimant owners’ application for an anti-suit injunction following the hand down of this judgment.

Cited in 1 later judgment