Mr Justice Gross:
INTRODUCTION
There is before the Court an application by the Defendant for an order
(1) declaring, pursuant to CPR, Part 11, that the Court does not have
jurisdiction over it; and (2) that the Claim Form in this case and service
thereof and of the Particulars of Claim, must be set aside.
In a nutshell, the Defendant submits that this Court has no jurisdiction
to entertain these proceedings and that any proceedings brought against
it by the Claimant must be pursued, in accordance with Art. 2 of Council
Regulation (EC) 44/2001 ("the Regulation", the successor to the Brussels
Convention), in France, its country of domicile.
The Claimant's answer is that it and the Defendant were or, pursuant to
the Carriage of Goods by Sea Act 1992 ("COGSA 1992") are to be treated
as, parties to a bill of lading contract, which incorporated by reference
to a charterparty, inter alia, an exclusive English jurisdiction clause ("the
EJC"). Accordingly, the Claimant contends that this Court has jurisdiction
to entertain these proceedings, by virtue of Art. 23 of the Regulation.
No other basis is asserted for English jurisdiction or for displacing the
basic rule under the Regulation, namely that in accordance with Art. 2, a
defendant is to be sued in the courts of his domicile.
Art. 23 of the Regulation provides as follows:
" 1. If the parties, one or more of whom is domiciled in a Member
State, have agreed that a court or courts of a Member State are to have
jurisdiction to settle any disputes which have arisen or may arise in
connection with a particular legal relationship, that court or those courts
shall have jurisdiction. Such jurisdiction shall be exclusive unless the
parties have agreed otherwise. Such an agreement shall be either:
(a) in writing or evidence in writing; or
(b) in a form which accords with practices which the parties have
established between themselves; or
(c) in international trade or commerce, in a form which accords with a
usage of which the parties are or ought to have been aware and which
in such trade or commerce is widely known to, and regularly observed
by, parties to contracts of the type involved in the particular trade or
commerce concerned... "
The principal issue on this application is whether the EJC was incorporated
into the bill of lading. If it was, then the Defendant's application must be
dismissed. If it was not, then the Defendant's application must succeed,
subject only to a point as to an alleged concession made by the Defendant
in French proceedings concerning a lien ("the concession point").
THE FACTS
I turn to the facts; for present purposes, these may be shortly
summarised.
By a voyage charterparty on the A form, dated 16th October, 2001
("the charterparty"), the Claimant chartered its vessel, the "S." ("the
vessel") to E. I. Corporation ("EIC") through E. E. F. and T. Limited London
("EEFT"), as charterer, for, in the event, the carriage of clean petroleum
products from India to France, via Malta.
At Malta part of the cargo was discharged for blending in shore tanks;
subsequently, some 30,000.945 mt of blended gasoil ("the cargo") was
re-loaded onto the vessel.
By a bill of lading, dated Malta 19th November, 2001 ("the bill of lading"),
the Claimant acknowledged shipment of the cargo in apparent good order
and condition by E. C. and T. R. International Corp. ("ECTRIC") through
EEFT, for carriage to and delivery at Sete, France.
At Sete, the cargo was discharged into shore tanks, for the account of the
Defendant, the ultimate purchaser of the cargo.
Doubtless due to the E. group's financial difficulties, EIC failed to pay
any of the freight (US$1.4 million) or loadport demurrage (US$131,000)
alleged by the Claimant to be due and owing in respect of the carriage of
cargo from India.
In consequence, the Claimant asserted a lien over the cargo in the
shore tanks at Sete and obtained from the French Court two "saisies
conservatoire" to secure its claim to freight and demurrage respectively.
Before the French Court, the Defendant contended that there was no lien.
As I understand it, the French Court has upheld the lien but on procedural
rather than substantive grounds.
For completeness, the freight and demurrage claimed by the Claimant has
still not been paid by EIC. An arbitration award in the Claimant's favour
against EIC remains unsatisfied.
In these proceedings, the Claimant seeks to recover from the Defendant
the amounts allegedly outstanding in respect of freight and demurrage.
The claim is brought under the bill of lading. The Claimant alleges that the
Defendant, as an indorsee of the bill of lading, is a lawful holder thereof
pursuant to s.2 (1) of COGSA and that, by taking delivery of the cargo
under the bill of lading, became subject to the outstanding liabilities
thereunder, pursuant to s.3(1) of COGSA. Such liabilities include liabilities
in respect of the freight and demurrage allegedly due to the Claimant
under the charterparty.
THE CONTRACTUAL TERMS
The charterparty: As foreshadowed, the charterparty was on the A. form.
By cl. M of Part I of the charterparty, Special Provisions Nos. 1-14 were
incorporated therein. Special Provision 14 provided that "Enron clauses as
amended and attached are incorporated" in the charterparty. The "Enron
clauses" were in fact the ECTRIC Charter Party Clauses ("the ECTRIC
clauses"), dated January 1, 1996. ECTRIC it will be recollected was the
shipper under the bill of lading, to which I shall return in due course. Cl.
49 of the ECTRIC clauses is central to the present dispute; it provided as
follows:
" 49. GOVERNING LAW/ DISPUTE RESOLUTION
Notwithstanding anything to the contrary contained in this Charter Party
(including Part II), the parties hereby agree as follows:
(a) This Charter Party shall be construed and interpreted in accordance
with, and governed by, the laws of England ….
(b) Subject to subclause (c) below, any dispute of whatsoever nature
arising under this Charter Party shall be determined by the English
[Court] … and the parties hereby expressly submit to the exclusive
jurisdiction of the English … Courts and to service of process by certified
or registered mail sent to the address for such party as set forth in Part I
hereof.
(c) Notwithstanding the foregoing… either party may … elect to have any
such dispute referred (and exclusively determined by) … arbitration in
London …
(d) It is expressly understood that this Clause supersedes the Arbitration
and Interpretation clauses in Part II hereof.
(e) All bills of lading under this Charter Party shall incorporate this
exclusive dispute resolution clause….."
There followed various (unnumbered) Additional Clauses, two of which
provided as follows:
" COMMERCIAL COURT LONDON
This charterparty shall be governed by and construed in accordance
with English law and the English courts have jurisdiction in respect of all
disputes arising out of this charter party.
LONDON ARBITRATION
This charterparty shall be governed by and construed in accordance
with English law and any dispute arising out of this charterparty shall be
referred to arbitration in London …"
Pausing here, it is plain and was not in dispute that the charterparty
was governed by English Law (cl.49(a)). Further, it seems clear that
the dispute resolution regime under the charterparty provided for the
exclusive jurisdiction of the English Court (cl. 49(b)), subject only to
the right of election for London arbitration (cl.49(c)). The additional
unnumbered clause spelled out these jurisdiction provisions. In effect,
this jurisdiction regime superseded the references to arbitration contained
in the standard A. form provisions found in Part I and Part II of the
charterparty.
The bill of lading: The bill of lading provided as follows:
" This shipment is carried under and pursuant to the terms of the charter
dated between and … and all the terms whatsoever of the said charter
apply to and govern the rights of the parties concerned in this shipment."
As is apparent, this provision did not supply the date of the charterparty
in question nor the names of the parties thereto. There is, however, no
realistic doubt that the charterparty in question was the charterparty
(dated 16th October, 2001, between the Claimant and EIC).
THE RIVAL CASES IN OUTLINE
I turn to the rival cases in outline, leaving over the concession point for
separate consideration at the end of this judgment.
Before proceeding further, it is convenient to explain the references which
follow to English and Community Law. It was common ground between
the parties that the question of whether as between the Claimant and
the Defendant (as holder of the bill of lading), in isolation, the EJC was
incorporated in the bill of lading was to be approached by reference to
Community Law. That said, there was no or no serious dispute that under
the bill of lading a holder would succeed to the rights and obligations of
the shipper. As there was at least some doubt as to the domicile of the
shipper (ECTRIC) and, accordingly, as to the applicability of Community
Law to the question of the incorporation of the EJC into the bill of lading
as between it and the Claimant, that question was addressed by the
parties in terms of English Law. On the view which I take of this matter,
as explained below, it is immaterial whether the incorporation issue
is addressed by reference to English or Community Law. While the
terminology differs, the two systems are engaged in an essentially similar
inquiry and it would in general be unlikely, if not impossible, that the
answer to the question of incorporation would differ as between English
and Community Law. Against this background, I shall follow the approach
adopted by the parties and deal with the matter in terms of both English
and Community Law.
For the Claimant, the essence of Mr. Young QC's argument proceeded as
follows. The starting point was the bill of lading contract but that contract
incorporated by reference "all the terms whatsoever" of the charterparty.
The precise wording "all the terms whatsoever" was very wide and
was not covered or confined by previous authority. That said, such
wording read simply with cl. 49(b) of the charterparty, would not suffice
to incorporate the EJC into the bill of lading. Matters did not, however,
rest there. Cl. 49(e) of the charterparty was of the first importance. Cl.
49(e) provided an explicit reference to the bills of lading and served to
make it plain that the EJC was intended to be operative in the bill of
lading context. The exercise of construction was to be undertaken in a
modern fashion and in any event it should not be assumed that the old
law as to the incorporation of arbitration clauses in bills of lading should
be applied to the incorporation of jurisdiction clauses. As between the
shipper (ECTRIC) and the Claimant, it would be contrary to commonsense
to treat the EJC as not incorporated in the bill of lading; most unusually,
the EJC here formed part of the shipper's rather than the shipowner's
standard terms. Accordingly, "stopping the clock" at the stage when
the bill of lading was a contract between the original parties thereto,
the conclusion was that the EJC was incorporated therein. If so, the
same conclusion followed with respect to the bill of lading contract as
between the Claimant and the Defendant (a subsequent holder). The
same answer was arrived at in terms of Community Law. By the route
of cl. 49(e), a consensus as to the incorporation of the EJC was clearly
and precisely demonstrated; if anything, this result was all the more clear
under Community Law, which was not hidebound by old English authority.
The Defendant's stance, involving as it does a subsidiary or arm of BP
resisting the English jurisdiction in order to conduct an English law dispute
before the French Courts, was without merit.
For the Defendant, Mr. Flaux QC emphasised its entitlement, under
Art. 2 of the Regulation, to be sued in the Courts of its domicile. That
entitlement was not displaced here; neither as a matter of English nor
Community Law was the EJC incorporated into the bill of lading contract.
As a matter of English Law, the inquiry began (and perhaps ended) with
the bill of lading contract. It was well-established that general wording
of incorporation such as "all the terms whatsoever" did not suffice to
incorporate into the bill of lading ancillary clauses such as arbitration or
jurisdiction clauses, which, for these purposes, were to be approached in
the same way. In order to incorporate the EJC into the bill of lading, there
needed to be some explicit reference thereto either in the bill of lading or
the charterparty. There was no such explicit reference in either the bill of
lading (with its general wording of incorporation) or the charterparty. As
to the charterparty, cl. 49(e) could not be relied on in order to construe
the bill of lading; cl. 49(e) went only to the intention of the parties to
the charterparty, not to the intention of the parties to the bill of lading.
There was no claim for rectification of the bill of lading; the subjective
intention of the parties thereto was irrelevant and no objective intention
to incorporate the EJC into the bill of lading could be demonstrated;
the fact that the EJC formed part of the ECTRIC standard terms did
not warrant re-writing the terms of the bill of lading contract. Neither
as between the original parties to the bill of lading nor as between the
Claimant and the Defendant, was the EJC incorporated therein. The same
conclusion was arrived at in terms of Community Law; no agreement to
incorporate the EJC had been clearly and precisely demonstrated. Had
there been any such intention, it could have been simply achieved by an
express reference to the EJC in the bill of lading.
Standing back from the matter, it seemed at once plain that the
Claimant's case for incorporation of the EJC into the charterparty could
readily be dismissed under both English and Community Law but for (1)
the presence of cl.49(e) of the charterparty; and (2) the fact that the EJC
formed part of the shipper's rather than the shipowner's standard clauses.
The question to be resolved is whether these two matters simply enabled
Mr. Young to argue the question of incorporation or whether they entitled
him to succeed on it. The route to the determination of this question lies
via the relevant frameworks of English and Community Law. To those I
now turn.
ENGLISH LAW
The incorporation of charterparty provisions in bills of lading in English
Law is an area well-travelled in the authorities. As to the following
propositions, there was no or no serious dispute:
i) The starting point is the contract contained in or evidenced by the
bill of lading; it is that contract which the court must construe. See, for
example: The Federal Bulker [1989] 1 Lloyd's Rep. 103, at pp.105, 110.
ii) The incorporation of terms is to be distinguished from mere notice of
terms; the fact that the holder of a bill of lading has notice of terms in a
charterparty does not mean that those terms are incorporated in the bill
of lading: The Varenna [1984] QB 599, esp. at pp. 616, 619. Further, it
is terms not intentions which are incorporated; in The Varenna, Oliver,LJ
said this (ibid):
" The purpose of referential incorporation is not – or at least not generally
– to incorporate the intentions of the parties to the contract whose
clauses are incorporated but to incorporate the clauses themselves in
order to avoid the necessity of writing them out verbatim."
iii) General words of incorporation will incorporate into the bill of lading
only those provisions of the charterparty which are directly germane
to the shipment, carriage and delivery of the goods. Provisions of the
charterparty which are ancillary rather than directly germane to the
subject-matter of the bill of lading as aforesaid, will not be incorporated
by general words of incorporation in the bill of lading. By way of
amplification:
a) "General words of incorporation" are to be distinguished from wording
making a specific reference to a particular charterparty provision
(for example, a charterparty arbitration clause). Accordingly, even
comparatively wide wording such as "all terms, conditions and exceptions
as per charterparty" constitute "general words of incorporation" for these
purposes.
b) Arbitration clauses are ancillary in this sense.
See: Thomas v Portsea [1912] AC 1; The Annefield [1971] P 168, esp. at
pp. 184, 186; The Federal Bulker (supra), at p.107.
iv) Even when the wording of a bill of lading is prima facie of sufficient
width to incorporate the charterparty clause in question, such
incorporation may be defeated if undue manipulation is required. That
said, in this regard the intention of the parties is paramount. Accordingly,
while the purported incorporation of certain charterparty clauses may
prove ineffective on the ground of linguistic inapplicability alone (for
example, charterparty arbitration clause wordings such as "any disputes
arising out of … this charter", as in Thomas v Portsea, supra), where the
intention to incorporate a particular charterparty clause is clear, difficulties
of manipulation may be overcome (as in The Nerano [1996] 1 Lloyd's
Rep. 1, where the wording of incorporation made explicit reference to an
otherwise inapplicable charterparty arbitration clause). It may well be that
the true intentions of the parties serve to define the ambit of permissible
manipulation: cf. The Miramar [1984] AC 676.
For the purposes of the present dispute, the more controversial aspects of
English Law may be grouped under the following headings:
i) (1) Does the inquiry end with the bill of lading contract ?
ii) (2) Are jurisdiction clauses to be treated differently from arbitration
clauses ?
iii) (3) When can the provisions of the charterparty be taken into
account ?
iv) (4) What is the relevance to the bill of lading contract of charterparty
clauses as to the intended form and content of bills of lading to be issued
thereunder ?
v) (5) Is English Law in this area hidebound by authority, antiquated and
over-technical?
I take each in turn.
(1) Does the inquiry end with the bill of lading contract ? There is, as it
seems to me, Court of Appeal authority for the proposition that unless
the wording in the bill of lading is of a sufficient width so as prima facie
to incorporate the provision of the charterparty under consideration, it
is irrelevant and unnecessary to construe the charterparty. That stage
is never reached; the inquiry not only begins but ends with the bill of
lading: See: The Varenna (supra), at pp. 618 and 621-2; The Federal
Bulker (supra), at pp. 108, 110. It appears to follow that where general
wording of incorporation in the bill of lading is insufficient to incorporate
an ancillary clause in the charterparty, such as an arbitration clause, then
the wording of the charterparty clause in question and whether or not it
contains an explicit reference to the bill of lading, matter not. If this be
right, it has obvious consequences for the suggested incorporation of the
EJC in this case, provided only that jurisdiction clauses are (for present
pruposes) indistinguishable from arbitration clauses (see below).
It may be, however, that the authorities do not all speak with one voice.
Observations of all three members of the Court of Appeal in The Merak
[1965] P 223, appear to suggest that the charterparty arbitration clause
was incorporated in the bill of lading on the basis, inter alia, that the
arbitration clause itself contained an explicit reference to the bill of
lading ("Any dispute arising out of this charter or any bill of lading issued
hereunder shall be referred to arbitration…"): see, esp. at pp.250, 253
and 259-260. Certainly, it is difficult to resist the conclusion that the
Court of Appeal in The Annefield (supra), a decision to which I must
shortly return, analysed The Merak in this way; see too and not least,
the judgment of Brandon,J. (as he then was) at first instance in The
Annefield, at pp.173 and following.
By contrast, in The Federal Bulker (at pp. 107-108), Bingham,LJ (as he
then was,) explained and distinguished The Merak on the basis of the
incorporation wording in the bills of lading. The word "clauses" included
in The Merak wording was sufficient to incorporate the arbitration clause,
whereas the word "terms", found in The Federal Bulker bill of lading was
insufficient to do so, in the light of the authority of Thomas v Portsea
(supra). See too, Oliver,LJ in The Varenna, at pp. 621-622.
It is unnecessary and inappropriate for me to say more on this topic. A
reconciliation between these approaches, if one is needed, must await
another occasion. Here, firstly, my duty is plain; I must follow the more
recent decisions of the Court of Appeal in The Varenna and The Federal
Bulker, even if I thought that they could not be reconciled with the earlier
decisions in The Merak and The Annefield. Secondly, on the view which I
take of the matter (see below), it matters not to the outcome of this case
whether I regard the inquiry as ending with the bill of lading wording or
whether I go on to consider the charterparty wording – which I shall do in
any event.
(2) Are jurisdiction clauses to be treated differently from arbitration
clauses? This question can be very shortly answered. Jurisdiction clauses,
like arbitration clauses, are ancillary to the subject-matter of a bill of
lading. There is no good reason for distinguishing between arbitration
and jurisdiction clauses in this regard: see, in the insurance, reinsurance
and Community Law context, AIG Europe v Ethniki [1998] 4 All ER 301,
at pp. 309-311 (Colman,J.) and [2000] 2 All ER 566 (CA), at pp. 375-6
(Evans,LJ); AIG v QBE [2001] 2 Lloyd's Rep. 268, esp. at paras. 17 and
26.
(3) When can the provisions of the charterparty be taken into account ?
As already foreshadowed, I propose to consider the position on the
assumption that the inquiry does not necessarily end with the wording
of the bill of lading. On this footing, it can confidently be said that
charterparty clauses ancillary or collateral to the subject-matter of
the bill of lading will only be incorporated into the bill of lading by
explicit reference, either in the bill of lading or the charterparty. Such
a proposition formed the ratio of The Annefield (supra) and the second
ratio of The Federal Bulker (supra). Whether there is, in any particular
case, such an "explicit reference", must be a matter of construction of the
contract in question.
The nature of this proposition may be seen most clearly from The
Annefield. There, the issue was whether the Centrocon arbitration clause
was incorporated in the bills of lading and hence whether the claim
was time barred. The material words in the bills were these: "… all the
terms, conditions and exceptions of …[the] charterparty, including the
negligence clause, are incorporated herewith." The arbitration clause in
the charterparty provided that "All disputes …arising out of this contract…"
were to be referred to arbitration. Such wording (of both the bills of lading
and the charterparty) had been in use since 1914; the selfsame point
had arisen on the same wording in The Njegos [1936] P 90, where it had
been held that the arbitration clause was not incorporated; Lord Denning
MR observed (at p.183) that it would require a strong case to upset the
practice. Upholding Brandon,J the Court of Appeal held that the arbitration
clause was not incorporated in the bills of lading. At pp. 184-185, Lord
Denning, MR said this:
" I would say that a clause which is directly germane to the subject-
matter of the bill of lading (that is, to the shipment, carriage and delivery
of goods) can and should be incorporated into the bill of lading contract,
even though it may involve a degree of manipulation of the words in
order to fit exactly the bill of lading. But if the clause is one which is
not thus directly germane, it should not be incorporated into the bill of
lading contract unless it is done explicitly in clear words either in the bill
of lading or in the charterparty.
Applying this test, it is clear that an arbitration clause is not directly
germane to the shipment, carriage and delivery of goods. That appears
from the decision of the House of Lords in T.W. Thomas & Co. Ltd. v
Portsea…. It is, therefore, not incorporated by general words in the bill
of lading. If it is to be incorporated, it must be either by express words
in the bill of lading itself (for example, if there were added in this case:
'including the arbitration clause as well as the negligence clause'), or by
express words in the charterparty itself (as indeed happened in The Merak
where the words were: 'Any dispute arising out of the charter or any
bill of lading issued hereunder'). If it is desired to bring in an arbitration
clause, it must be done explicitly in one document or the other…..
In this case the words in the charterparty are 'any disputes under this
contract.' Those words, in this context, meant: 'under this charterparty
contract'. They do not include the bill of lading contract. In any case they
are not so explicit as to bring in disputes under the bill of lading."
Cairns,LJ (at p.186) succinctly encapsulated the matter in this way:
" … there must be incorporated in the bill of lading only such terms
as are directly relevant to the shipment, carriage or discharge of the
cargo or which by explicit reference, either in the bill of lading or in the
charterparty, are intended to be incorporated."
(4) What is the relevance to the bill of lading contract of charterparty
clauses as to the intended form and content of bills of lading to be issued
thereunder ? Whether strictly ratio or not, powerful observations in The
Merak, The Varenna and The Federal Bulker support the answer that
clauses in the charterparty as to the form or content of bills of lading to
be issued thereunder are irrelevant to the contract constituted by the bills
of lading themselves. Such clauses have certainly not been treated as
furnishing the "explicit reference", as discussed in The Annefield, to the
ancillary clause which it is sought to incorporate into the bill of lading.
Taking these authorities in turn:
i) In The Merak, the bill of lading had mistakenly referred to cl. 30 of
the charterparty, whereas the arbitration clause in the charterparty was
numbered 32. To overcome this difficulty, it was argued that another
clause of the charterparty (clause 10) made it plain which clause
was referred to as clause 30 in the bills of lading. Clause 10 of the
charterparty provided, so far as material, as follows: "the bills of lading
shall be prepared in the form indorsed upon this charter and shall be
signed by the master, quality, condition and measure unknown, freight
and all terms, conditions, clauses (including clause 32) and exceptions as
per this charter." Russell, LJ (at p.259), rejected this argument:
" The agreement between charterer and shipowner that bills issued
under the charter ought to take a particular form cannot be regarded
as incorporated in the bill: as a contractual term it is irrelevant to the
contract constituted by the bill itself… "
ii) In The Varenna, the consignees of the cargo in question were seeking a
stay of the court proceedings in which owners were claiming demurrage,
on the ground that the bill of lading incorporated an arbitration clause.
As already noted, the consignees failed, without reference to the
charterparty wording, because the language of the bill of lading was
insufficient to incorporate the charterparty arbitration clause. However,
Oliver,LJ (as he then was) went on to consider the position under the
charterparty. He alluded to the difficulty faced by the consignees at this
stage, given that the arbitration clause referred to disputes "under this
charter". As Oliver,LJ remarked, the consignees sought to escape from
this dilemma by reliance on a clause of the charterparty (cl. 44) which
provided that "all bills of lading issued pursuant to this charter shall
incorporate by reference all terms and conditions of this charter including
the terms of the arbitration clause…". Oliver,LJ (at p.623) rejected this
argument. It could "scarcely be argued" that this clause itself could be
incorporated in the bill of lading. This was the same argument as that
advanced in The Merak and rejected by Russell,LJ, whose reasoning
Oliver,LJ found persuasive. He continued:
"I do not see how it can be permissible to ascertain what the parties to a
particular contract intended to be incorporated by reference to an entirely
different document."
iii) The judgment at first instance in The Varenna was given by
Hobhouse,J (as he then was) and repays careful study. Whatever precise
approach was adopted to the clause in the charterparty dealing with the
intended form or content of bills of lading to be issued thereunder (a
matter on which Oliver,LJ was more inclined than Hobhouse,J to follow
the observations of Russell,LJ in The Merak), it was still necessary, as
Hobhouse,J put it (at p.610), to look for "a clear, explicit intention to
incorporate the charterparty arbitration clause into the bill of lading".
Continuing, the learned Judge said this:
"If, as in the present case, the bill of lading wording specifically creates an
antithesis with the charterparty wording so that one must infer, reading
the two documents together, an intention of the parties to the bill of
lading to incorporate less into the bill of lading than the charterparty had
provided, then the charterparty clause cannot … affect the incorporation
proprio motu. On the other hand, if the bill of lading wording does follow
that of the relevant provision in the charterparty, they must both, ex
hypothesi disclose a clear, explicit intention to make the bill of lading
subject to an arbitration clause and no problem arises. If the bill of lading
wording … had followed the wording of clause 44 of the charterparty the
arbitration clause would clearly have been incorporated.
… The bill of lading uses a well-established form of wording of well-
known and limited effect. It demonstrates that the bill of lading parties
did not intend the wide incorporation provided for by clause 44 of the
charterparty…."
In short, a charterparty clause dealing with the intended form or content
of bills of lading to be issued thereunder either (a) added nothing to the
argument for incorporation, because the wording of the bill of lading
followed the wording of the clause, or (b) told against the argument for
incorporation, because the difference between the wordings disclosed an
intention by the parties to the bill of lading contract not to give effect to
the intentions of the parties to the charterparty.
iv) Finally, in The Federal Bulker, Bingham,LJ (at p.109) cited the above
observations of both Russell,LJ and Oliver,LJ, with approval; he added
that the difficulty of relying on the intentions of parties, one of whom was
not a party to the bill of lading contract, was illustrated in that case by the
fact that the bills of lading actually issued contained some but not all of
the clauses stipulated in the charterparty. Bingham,LJ concluded these
remarks (ibid), by observing:
"If the cargo-owners were to succeed on this point they would … have to
show that the express terms of the arbitration clause apply to resolution
of disputes arising under the bill of lading."
Dillon,LJ put the same matter tersely (at p.111):
" One has to look at the bill of lading to see what was intended to be
incorporated in the bill of lading."
(5) Is English Law in this area hidebound by authority, antiquated and
over-technical? I canvass this issue in the light of Mr. Young's argument
that a "modern" approach to construction was to be adopted. Insofar
as that submission implied that the authorities adopted a hidebound,
antiquated, or over-technical approach, I am unable to accept it. To the
contrary, the approach of the Courts to the incorporation by reference
of charterparty clauses in bills of lading reflects the need for clarity
and precision arising from (a) the status of bills of lading as negotiable
commercial instruments; (b) the jurisdictional consequences of such
incorporation; and (c) the importance of certainty in this area.
Elaboration is hardly necessary but, as to (a), bills of lading may pass
through many hands internationally. As to (b), the incorporation of
arbitration or jurisdiction clauses in bills of lading may result in the
displacement of the jurisdiction otherwise seized of the matter – as here,
where the EJC, if incorporated, would override the general principle
contained in Art. 2 of the Regulation. As to (c), the need for certainty
is readily apparent; where a settled construction has been placed on
a particular form of words, commercial parties are entitled to rely and
act upon it. If there is dissatisfaction with the line drawn in previous
authorities, the parties are free to make specific provision to the contrary.
See, generally, Bingham,LJ in The Federal Bulker (supra), at p.105.
In the light of all these considerations, there is nothing over-technical
in requiring parties to a bill of lading who intend to incorporate a
charterparty arbitration or jurisdiction clause to make that intention clear;
moreover, it can be done very simply by explicit reference in the bill of
lading incorporation wording.
A postscript on English Law: Notwithstanding the importance of
considerations such as certainty which point to the conclusion to be
reached in the generality of cases, the principles in this area are "rules" or
aids to construction; they are not to be treated as statutes. In every case,
the Court is seeking to ascertain the intention of the parties and, when
construing the language, it is necessary to have regard to the individual
context and commercial background. See: AIG Europe v Ethniki (supra),
at p.311 (Colman,J) and AIG v QBE (supra), at p.273. If necessary,
general "rules" may have to yield to exceptional or unusual facts.
COMMUNITY LAW
The applicable principles of Community Law may be summarised
comparatively briefly.
Art. 2 of the Regulation provides (subject to the other provisions thereof)
that a person domiciled in a Member State shall be sued in the courts of
that Member State. That domiciliary rule expressed the "basic philosophy"
of the Brussels Convention ("the Convention"): Knauf v Peters [2001]
EWCA Civ 1570; [2002] 1 Lloyd's Rep. 199, at [49]. It accordingly
expresses the basic philosophy of the Regulation. As Henry,LJ remarked in
Knauf v Peters (ibid):
" It is not merely that a claimant is entitled to sue his defendant where he
is domiciled; the defendant is entitled to be sued there."
Art. 23 of the Regulation (the terms of which have already been set out)
deals with jurisdiction clauses. It has replaced Art. 17 of the Convention,
as amended and is further drafted so as to reflect the interpretation
placed on Art. 17 by decisions of the European Court. The effect of a
consensual agreement as to jurisdiction within Art. 23 is to exclude both
the general principle laid down in Art. 2 and the special jurisdictions
provided for in Arts. 5 and 6 of the Regulation. Against this background,
the requirements which a jurisdiction clause must fulfil to come within
Art. 17 have been strictly construed under Community Law; such clauses
must be the "subject of a consensus between the parties, which must
be clearly and precisely demonstrated": Salotti v RUWA [1976] ECR
1831, esp. at para. 7, a decision on Art. 17 in its original form. The strict
Salotti approach remains good law; the subsequent amendment to Art.
17 and the further changes introduced in Art. 23 accommodate a course
of dealings between the parties and practices in international trade; they
do not signify any relaxation in the requirement of consensus, clearly and
precisely demonstrated.
In AIG v QBE (supra), Moore-Bick,J. considered (inter alia) whether a
jurisdiction clause had been incorporated by reference from an insurance
contract into a reinsurance contract. On the facts of the case, the
answer was that it had not been. The decision turned on Art. 17 of the
Convention and contains, with respect, an instructive treatment of the
relevant Community Law considerations, taking into account Salotti
(supra), together with other decisions of the European Court, in addition
to the decision of Colman,J. in AIG v Ethniki (supra). From this valuable
judgment (see, esp. paras. 15, 22 and 25-26), I would seek to extract the
following guidance:
i) The construction and effect of Art. 17 was to be determined by
reference to Community Law rather than the proper law of the contract.
ii) In Community Law, there was a need to be confident that the
jurisdiction clause had been effectively drawn to the attention of the other
contracting party so as to satisfy the requirement of genuine consensus.
iii) Community Law recognised the validity of incorporation by reference,
provided that the body of terms to be incorporated was clearly identified
and whether or not it was available to the contracting parties at the time
of entry into the contract.
iv) For the purposes of Art. 17, Community Law, like English Law,
regarded jurisdiction clauses as ancillary to the substantive provisions of
the contract. In many cases, general words of incorporation would only
suffice to incorporate terms germane to the subject-matter of the contract
and not terms ancillary thereto; the reason is that in the absence of
specific language, the Court may not be able to conclude that the parties
have demonstrated clearly and precisely the existence of a consensus
to incorporate clauses which are ancillary to the subject-matter of their
contract.
v) While, in Community Law, the language of the contract was
emphasised, rather than extrinsic factors, this did not entail ignoring the
commercial background; to the contrary, in each case the Court must
construe the language of the contract in context and inquire whether
a consensus on the subject matter of the jurisdiction clause had been
clearly and precisely demonstrated. It was, however, to be kept in mind
that the commercial background could not always be relied upon to make
good deficiencies in the language which the parties had chosen to use.
With regard to the position of subsequent holders of bills of lading, as
distinct from the original parties thereto, the European Court has held as
follows: if a jurisdiction clause included in the carrier's printed conditions
of carriage was effective as between the carrier and the shipper, then
it was also effective between the carrier and any subsequent holders,
provided that under the relevant national law, the holder of the bill of
lading succeeded to the shipper's rights and obligations thereunder: The
Tilly Russ [1985] QB 931; Coreck Maritime v Handelsveem [2000] ECR
I-9337. Given the recognition by Community Law of incorporation by
reference (see above), it seems to me to follow that the same answer
would be given in respect of a jurisdiction clause effectively incorporated
by reference into a bill of lading.
Pausing here, in my judgment, though the route followed may be
different, the objectives of English and Community Law in this area are
very similar indeed. It is true that in Community Law attention must be
focussed on the provisions of Art. 23 of the Regulation and that no such
question arises in English Law. It is equally true that in English Law there
is a weight of relevant authority not present in Community Law. That said,
it would be surprising indeed if, at least in the generality of cases, the
answer arrived at was not the same under English and Community Law.
For completeness, in the light of certain allusions in the argument at the
hearing, given the jurisdiction regime contained in the Regulation, the fact
that a dispute may be governed by one national law but proceed before
the Courts of another Member State, is a commonplace and not a matter
for remark.
CONCLUSIONS AS TO INCORPORATION
Applying the law to the facts, in my judgment, Mr. Young's argument
faces insuperable hurdles under both English and Community Law.
Whether as between the original parties or as between the Claimant and
the Defendant (a subsequent holder) I am persuaded that the EJC was
not incorporated into the bill of lading. Accordingly, subject only to the
concession point, the Defendant's application must succeed. My reasons
follow.
English Law: (1) The first hurdle: I start with the bill of lading. The
incorporation wording was general, "..all the terms whatsoever of the said
charter..". There was no explicit reference to the EJC in the bill of lading.
On the authorities, general wording including "all terms" is insufficient to
incorporate an ancillary charterparty arbitration clause into a bill of lading:
Thomas v Portsea; The Federal Bulker. The same result must follow with
regard to charterparty jurisdiction clauses. Does the addition of the word
"whatsoever" make all the difference ? I do not think it does or should.
i) In principle, the real divide lies between general wording of
incorporation on the one hand and explicit reference to the ancillary
clause in the charterparty, on the other. With or without the word
"whatsoever", the incorporation wording in the bill of lading was general
wording.
ii) If and insofar as it is necessary to qualify this principle and to treat
incorporation as turning on the precise form of general wording used in
the bill of lading, then, on the authority of the analysis contained in The
Federal Bulker of the wording of incorporation in The Merak, the addition
of the word "clauses" was decisive; wording going no wider than "all
terms" was insufficient to achieve the necessary incorporation.
iii) I cannot accept that "all terms" would be insufficient to incorporate
an ancillary charterparty clause into a bill of lading but "all terms
whatsoever" would be apt to do so. As already discussed a bill of lading
has the status of a negotiable commercial instrument. If the word
"terms" lacks the necessary width, there can be no good reason for the
rights of holders to hinge on the addition of the word "whatsoever". No
authority on the word "whatsoever" compels such a conclusion; instead,
the interests of certainty support the conclusion that a general formula
involving no wider wording than "terms" will not suffice for present
purposes.
In the light of the decisions of the Court of Appeal in The Varenna and
The Federal Bulker, this conclusion is by itself fatal to any argument that
it is permissible to proceed from the wording of incorporation in the bill
of lading directly to the EJC. In other words, as I understood Mr. Young
to accept, if matters rested with the bill of lading and the EJC alone, the
Claimant's case could not succeed.
Faced with this difficulty, the Claimant must in some other fashion
construct a bridge between the bill of lading and the charterparty. This
it seeks to do by placing reliance on cl.49(e) of the charterparty. I shall
presently deal with the difficulties in the way of this approach at the stage
of considering the charterparty (on the assumption that that stage is
reached). For immediate purposes, confining myself to the bill of lading,
if the wording "all the terms whatsoever" is insufficient to incorporate the
EJC (cl. 49(b) of the charterparty), then I cannot see why it should be apt
to bring cl. 49(e) of the charterparty into the bill of lading in any manner;
plainly, cl.49(e) is every bit as ancillary to the subject-matter of the bill of
lading as the EJC itself.
If this conclusion is right, then the Claimant's case must fail at the
first hurdle. The inquiry begins and ends with the bill of lading. It
is unnecessary and irrelevant to have regard to the terms of the
charterparty. I go on, however, to consider the charterparty.
(2) The EJC itself (cl. 49(b) of the charterparty): Even if it is permissible
to get as far as the EJC, it lends no support to the Claimant's case for
incorporation.
The EJC provided that "any dispute … arising under this Charter
Party" shall be determined by the English Court. The contrast with the
(arbitration) clause in The Merak, which made explicit reference to
disputes arising out of the bill of lading, could not be more marked;
the EJC is not even a clause which provided for any disputes "under
this contract" to be determined by the English Court. Still further, the
concluding words of the EJC contain a specific and personal reference to
the parties to the charterparty, when dealing with service of process.
For completeness, if academic, had the wording in the bill of lading
demonstrated a manifest intention to incorporate the EJC, then, for my
part, following The Nerano, I would not have been inclined to regard the
need for manipulation, by itself, to preclude incorporation.
(3) Cl. 49(e) of the charterparty: Accordingly, neither the incorporation
wording of the bill of lading read on its own nor considered in conjunction
with the EJC itself, is sufficient to incorporate the EJC into the bill of
lading. It follows that (assuming reference to the charterparty to be
permissible at all) the Claimant's argument depends on the opening words
of cl. 49(e) of the charterparty, namely, that "all bills of lading under this
Charter Party shall incorporate this exclusive dispute resolution clause". In
my judgment, that is a weight which cl.49(e) cannot bear.
First, cl. 49(e) is a charterparty clause as to the form or content of bills of
lading to be issued thereunder; indeed, I did not understand the contrary
to be suggested. The location of cl.49(e) can make no difference; the fact
that it is a sub-clause of cl. 49, rather than a separate clause, must be
neither here nor there.
Secondly, if this characterisation of cl. 49(e) is correct, then the
observations (recorded earlier) in The Merak, The Varenna and The
Federal Bulker, as to such clauses are in point. Whether or not strictly
ratio, those observations are persuasive and tell, in general, against
cl.49(e) assisting the argument for incorporation of the EJC into the bill of
lading. In essence:
i) Cl. 49(e) is not itself incorporated into the bill of lading; it is plainly
inapt to be incorporated.
ii) The intention of the parties to the charterparty, expressed in cl. 49(e)
is irrelevant to the construction of the bill of lading contract.
iii) If and insofar as cl. 49(e) sheds any light on the intention of the
parties to the bill of lading contract, the fact that the wording of the bill
of lading did not follow the wording contemplated by cl. 49(e) gives rise,
if anything, to the inference that they did not intend to give effect to
the intentions of the parties to the charterparty; see, in this regard, the
reasoning of Hobhouse,J. in The Varenna (at p.610).
iv) Assuming The Merak to be good law as regards the incorporation
of a charterparty arbitration or jurisdiction clause based on an explicit
reference in the charterparty, the present is not a like case. The explicit
reference in The Merak was contained in the arbitration clause itself;
a clause to be incorporated in the bill of lading. The sole reference to
incorporation of the EJC here is to be found in cl. 49(e). To hold that
in the present case there was the necessary "explicit reference" to
incorporation of the EJC by reason of cl. 49(e) would not be an application
of The Merak (the high water mark of incorporation cases); it would be
an extension of The Merak and, moreover, an extension in a manner
disapproved of (at least by Russell, LJ) in The Merak itself and in the
other authorities to which reference has been made.
v) While it is correct, as Mr. Young urged, that there are factual
differences between cl.49(e) here and the clauses under consideration in
the authorities in question, to my mind these are distinctions without a
material difference.
Thirdly, the fact that the EJC was contained in the ECTRIC clauses does
not tip the scale in favour of its incorporation into the bill of lading.
i) As it seems to me, the high point of any such argument must be this:
given that the EJC formed part of the ECTRIC clauses, cl.49(e) of the
charterparty (entered into between the Claimant and EIC) must be
taken as indicative of the intentions of the original parties to the bill of
lading (the Claimant and ECTRIC) to incorporate the EJC therein. The
Claimant had signified its intention to do so in the charterparty; ECTRIC
must have had a like intention with regard to the bill of lading, given
that the EJC formed part of its own standard terms. If so, then the EJC
remained incorporated in the bill of lading when it came into the hands
of subsequent holders. Whatever the position generally as to clauses in
charterparties concerning the form and content of bills of lading to be
issued thereunder, in this case cl.49(e) was relevant to the bill of lading
by reason of the ECTRIC clauses comprising the shipper's rather than the
shipowner's standard terms. For the reasons which follow, I cannot accept
this submission.
ii) To begin with, it must be underlined that the task is to construe the bill
of lading; that task involves ascertaining the objective intentions of the
parties to the bill of lading. There is no claim to rectify the bill of lading.
The subjective intentions of the parties to the bill of lading are therefore
irrelevant. The fact, if it be the fact, that one or other of the original
parties to the bill of lading subjectively intended to incorporate the EJC is
neither here nor there.
iii) As already discussed, unless the wording "all terms whatsoever" is to
be read in a wholly novel and, in my judgment, insupportable manner
as extending, directly or via cl.49(e) to the EJC, there is nothing in the
wording of the bill of lading itself which appears capable of disclosing an
intention to incorporate the EJC.
iv) It remains to consider whether there is matrix evidence, disclosing
that the parties to the bill of lading contract, notwithstanding the initial
impression given by its language, intended to incorporate the EJC.
Pausing here, it is to be noted that the Claimant does not seek to rely
on any matrix evidence relating to the bill of lading contract, other
than the existence of cl.49(e) of the charterparty and the origins of the
ECTRIC clauses. I do not think that the Claimant's intention as a party
to the charterparty can be amalgamated with what is no more than
an inference as to ECTRIC's intention, derived from the origins of the
ECTRIC clauses, so as to read into the bill of lading something which is
not otherwise there. Nor do I think that such material as there is warrants
jettisoning the guidance given in the authorities as to the nature and
analysis of clauses such as cl. 49(e). For this submission to succeed,
it has to be said contrary to such guidance and improbably (1) that
cl.49(e) is itself to be incorporated in the bill of lading; and/or (2) that
clause 49(e) is both relevant to and decisive as to the intentions of the
parties to the bill of lading, notwithstanding no outward manifestation
of such intentions in the bill of lading itself. On any view, the submission
inescapably requires the re-writing of the bill of lading; it is not a matter
of doing no more than construing the bill of lading in context. For my part,
this is a leap altogether too far. I am not persuaded that the provenance
of the clauses of which the EJC forms a part, justifies such a conclusion
or that commonsense dictates it. On all the material available to me, the
furthest I would be minded to go is to accept that there would have been
understandable reasons why the original parties to the bill of lading might
have contemplated incorporating the EJC; absent a case of rectification,
such an argument cannot go anywhere; if that was what the parties had
in mind, the contract they entered into failed to achieve it.
Returning to the question originally posed, the presence of cl. 49(e)
and the fact that the EJC formed part of the ECTRIC clauses, enabled
Mr. Young to submit that, as a matter of English Law, the EJC was
incorporated in the bill of lading; these considerations do not entitle that
argument to succeed. The hill is simply too steep to climb. Even having
regard to cl.49(e), The Varenna and The Federal Bulker stand in the way
of the Claimant getting to the charterparty at all. If that be wrong and
the charterparty is reached, to hold that cl.49(e), considered in context,
achieves the incorporation of the EJC into the bill of lading, would, inter
alia, fly in the face of the reasoned observations contained in The Merak,
The Varenna and The Federal Bulker. In short, the route to incorporation
of the EJC via cl. 49(e) of the charterparty, does not work. I add this.
Had the original parties to the bill of lading intended to do so, they could
very simply have put the matter beyond argument, by doing no more
than adding to the language of incorporation in the bill of lading the words
"including the dispute resolution clause"; that wording would then have
read "all the terms whatsoever of the said charter including the dispute
resolution clause apply to and govern the rights of the parties concerned
in this shipment". This they failed to do; for all the reasons already
discussed, it is not for the Court to strain the construction of either the
bill of lading or the charterparty so as to re-write their agreement. It is
perhaps not to be forgotten that the full style of the ECTRIC clauses is
"the ECTRIC Charter Party Clauses".
Community Law: Given the relatively extended and overlapping discussion
of English Law, I can state my conclusions as to Community Law very
shortly indeed. The question here is whether the basic philosophy
contained in Art. 2 of the Regulation has been displaced by the EJC?
In summary, whatever the position as between the parties to the
charterparty, I am wholly unpersuaded that a consensus between the
parties to the bill of lading to do so has been demonstrated, let alone
clearly and precisely demonstrated. As with English Law, if incorporation
of the EJC was desired, the parties to the bill of lading could and should
have made their intentions clear in the bill of lading wording, or, at
the least, in the EJC itself. While incorporation by reference from a
charterparty is permissible in Community Law, the concerns which it
occasions, especially in connection with general wording of incorporation
and clauses ancillary to the subject-matter of the bill of lading, are, in
substance, similar to those encountered in English Law. The presence of
cl.49(e) and the provenance of the clauses of which the EJC forms part,
do not outweigh the difficulties to which the language, chosen by the
parties to express their bargain, has given rise. Jurisdiction clauses are
not to be incorporated, as it were, by a sidewind.
It is true, as foreshadowed earlier, that in the result a dispute governed
or largely governed by English Law, will be heard before the French
Courts; it may further be true that the stance of the Defendant is possibly
opportunistic or guided by partisan considerations lacking in "merits";
so be it. Such an outcome is no more or less than a consequence of the
jurisdiction regime of the Regulation.
THE CONCESSION POINT
This point can be taken almost summarily. The argument here is
that in the course of the French proceedings, a French lawyer acting
for the Defendant admitted in written submissions or otherwise the
incorporation of the EJC. The parties, sensibly, if I may say so, agreed
that I could deal with this matter on the documents and without the
need for oral evidence. In the event, on the available materials, I am
not persuaded that the Defendant's admission in the French proceedings
went beyond accepting that (1) the charterparty and (2) the validity
of the lien, were, respectively, governed by and to be determined in
accordance with, English Law. I am bound to add, that even had any such
"admission" extended to the EJC, it should not readily be assumed that
the requirements of Art. 23 of the Regulation would thereby have been
satisfied; as a matter of English Law, such an admission would have been
immaterial at least unless a case of election or estoppel could have been
made good. In the event, it is unnecessary to say more of the concession
point.
OVERALL CONCLUSION
The Defendant's application must accordingly succeed. I shall be grateful
for the assistance of counsel as to the form of the order and all questions
of costs.
Finally, I record as requested, that the parties reserved the right to argue
before a higher Court (1) on the part of the Claimant, that many of the
English Law cases in this area were wrongly decided; and (2) on the part
of the Defendant, that The Merak was wrongly decided.