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Ong, Collin --- "Uncertainty in the Strive for Certainty: The Incorporation of Charterparties into Bills of Lading" [2017] WAStuLawRw 10; (2017) 1 Western Australian Student Law Review 155


UNCERTAINTY IN THE STRIVE FOR CERTAINTY: THE INCORPORATION OF CHARTERPARTIES INTO BILLS OF LADING

Collin Ong[*]

Maritime Law—Shipping Law—Bills of Lading—Charterparties—Incorporation of Charterparty Terms—Third Parties

Often in commercial contracts, the contractual document itself will incorporate terms external to it by reference. The incorporation of charterparty terms into bills of lading binds third parties, despite their lack of knowledge about the terms. Thus, despite the focus of maritime law on certainty, the incorporation of charterparty terms into bills of lading is an area that remains highly litigated. Under the English approach to incorporation of charterparty terms, there are four challenges that must be overcome for the successful incorporation of charterparty terms into bills of lading: the rules of formalities, the description test, the manipulation test, and the consistency test. This article will examine the current legal position with respect to those four tests, considering what exactly is required to successfully incorporate charterparty terms into bills of lading. In discussing the courts’ approach to incorporation of charterparty terms, this article will highlight the inconsistent jurisprudence in this area. Thus, parties must be careful when drafting their incorporation clauses to ensure that the charterparty terms they seek to incorporate will be incorporated into the bill of lading.

I INTRODUCTION

In Vallejo v Wheeler, Lord Mansfield stated that ‘it is of more consequence that a rule should be certain, than whether the rule is established one way or the other’.[1] In the context of maritime law, certainty and clarity are particularly important when incorporating charterparty clauses into bills of lading.[2] This is because the negotiability of bills of lading, which enables title over the cargo to be transferred to a third party, means that successfully incorporated charterparty clauses can bind third parties who have no knowledge of those clauses. A bill of lading is a document evidencing the contract of carriage between the shipper and the carrier. It also acts as a receipt of the cargo shipped and provides details as to the condition of the cargo. A bill of lading entitles its holder to title over the cargo.[3] A charterparty is the actual contract outlining the terms for the use of the vessel between the shipowner and the charterer. In a voyage charterparty, the shipowner agrees to transport cargo from one point to another. In a time charterparty, the shipowner agrees to let the charterer hire the vessel for a specific period of time.

Not all charterparty clauses will be relevant to the relationship between the carrier and holder.[4] As such, English law has adopted a strict approach to the incorporation of clauses into bills of lading, as compared to non-negotiable contracts.[5] This is particularly so for the incorporation of ancillary clauses compared to germane clauses.[6] Germane clauses, such as freight clauses, relate directly to the subject of the bill of lading as a contract of carriage, whereas ancillary clauses do not.[7] Ancillary clauses, such as arbitration and exclusive jurisdiction clauses, attract stricter incorporation rules due to their displacement of the ordinary jurisdiction or legal recourse that would otherwise apply.[8] There are four challenges that must be overcome for a charterparty clause to be successfully incorporated into a bill of lading: the rules of formalities, the description test, the manipulation test, and the consistency test.[9] This article will examine these four tests with respect to the incorporation of germane and ancillary charterparty clauses. It will also briefly discuss the application of forum non conveniens to set aside exclusive jurisdiction clauses.

II FORMALITIES

The following section of this article examines the formalities that must first be satisfied for charterparty clauses to be successfully incorporated into bills of lading. The rules of formalities concern the identification and form of the charterparty.[10]

A Identification

No identification issues arise where a charterparty is expressly identified in the bill or where there is only one charterparty that can be incorporated.[11] English courts are reluctant to deem a charterparty unincorporated because the incorporation clause does not clearly identify a charterparty to incorporate.[12] This is because voiding the bill of lading and the terms it incorporates would go against the parties’ intention.[13] A charterparty can therefore be incorporated without being identified by objectively ascertaining the original bill of lading parties’ intentions.[14] The holder’s knowledge or notice of the charterparty to be incorporated is irrelevant,[15] because it is the clauses that must be incorporated, rather than the parties’ intentions.[16]

Where there are multiple charterparties that can be incorporated, it is presumed the head charter is incorporated.[17] This is because the carrier is often the shipowner and would want to incorporate the charter that the carrier is a party to.[18] This presumption places the risk of the head charterer’s failure to pay freight or hire on the holder.[19] While this is contrary to the contra proferentem rule,[20] it is justifiable on the basis of commerciality,[21] because incorporation clauses seek to bind holders to the same terms as the charterers.[22]

The presumption shifts to incorporation of the sub-charter where the sub-charter is a voyage charterparty.[23] This promotes certainty because a voyage charterparty is more likely to contain relevant terms to a bill of lading than a time charterparty.[24] This shift in presumption also facilitates incorporation, particularly in light of the manipulation and consistency tests. The presumption will also shift where the carrier under the bill is the charterer, because the sub-charter is the relevant charter with the holder.[25]

Whether the head charter will apply where the head charter and sub-charter are both time charterparties is uncertain.[26] In The Vinson,[27] the head charter and sub-charter were both time charterparties. The sub-charter was incorporated because only its terms were appropriate.[28] However, Smith J noted that the facts of the case were ‘unusual’ because the head charter only formed part of the overall agreement between the shipowners and head charterers.[29] Therefore, The Vinson may not represent a rule that can be consistently followed in cases where both a head charter and sub-charter are time charterparties.

Thus, the formal requirement of identification of a charterparty can potentially be satisfied by one of the above presumptions, even where it is unclear which charterparty the incorporation clause refers to. The charterparty that will be incorporated is ultimately determined by what makes the most commercial sense.[30]

B Form

Only charterparties that are in written form at the date the bill of lading is issued can be incorporated.[31] Amendments to a charterparty will only be incorporated if the amendments are made before the bill is issued.[32] Courts have previously refused to allow verbal agreements between carriers and shippers to bind bills of lading holders because the bill of lading is merely evidence of a contract of carriage between the carrier and shipper;[33] the actual charterparty term that is incorporated needs to be readily ascertainable.[34] This is usually not possible with a verbal agreement.

In The Heidberg,[35] the relevant bill of lading provided that the arbitration clause of an unidentified charter was to be incorporated. There were two potential charterparties: one on a Synacomex form, and an orally concluded agreement that was evidenced by a recap telex. Justice Diamond stated that the bill was ‘more apt to refer to an instrument in writing than to an oral contract evidenced by a recap telex’.[36] His Honour further stated that holders should be able to ascertain incorporated terms without extensive investigations.[37]

However, this approach might be considered uncommercial, given that bills of lading are commonly issued before charterparties are drafted and signed.[38] This was recognised in The Northern Progress,[39] where an unconcluded charterparty was incorporated because the incorporation clause specifically contemplated a future contract. Justice Rix noted that parties often enter into contracts with unknown incorporated terms that may be very difficult for them to consult. Accordingly, the fact that the charterparty was unconcluded did not render the incorporation ineffective.[40] His Honour’s reasoning is noticeably inconsistent with The Heidberg. It would seem that the incorporation of unconcluded charterparties is permissible where the transactions make it impossible to conclude the charter before its incorporation into the bill.[41] However, the terms to be incorporated must still be usual and reasonable.[42] Considering the above contradicting cases, the common law position is somewhat unclear.

The Heidberg was also not followed in The Epsilon Rosa,[43] where a charter evidenced in a recap telex was incorporated into the bill. Courts have accepted that recap telex will satisfy the written requirement for incorporation because charterparties are commonly concluded by fax, telex and email.[44] This is consistent with the courts’ emphasis on commercial sense.

III THE DESCRIPTION TEST

The description test is the second challenge that must be satisfied for successful incorporation of charterparty terms into bills of lading. The description test requires charterparty clauses to be sufficiently described in the incorporation clause.[45] This is a matter of construction.[46] Courts will apply an established interpretation of particular words to maintain certainty.[47] The holder’s knowledge or notice regarding the charterparty clauses does not alter the English approach to incorporation.[48] Courts have differentiated between general and specific incorporating words for germane and ancillary clauses.[49]

A Germane clauses

General incorporating words will incorporate charterparty clauses that are directly germane or relevant to the shipment, carriage, and delivery of the cargo or the payment of freight.[50] Early incorporation clauses that referred to charterparty freight only incorporated freight payment clauses, including the payment method,[51] but not the demurrage clause.[52] Following this, incorporation clauses were drafted using more general and broad words, such as ‘conditions’, ‘exceptions’ and ‘terms’.[53]

1 Conditions

Clauses incorporating ‘freight and all other conditions as per charterparty’[54] will only incorporate conditions performed by the consignee, including freight, demurrage, and deadfreight,[55] rather than all charterparty clauses.[56] This restrictive construction was adopted based on the ejusdem generis rule, with ‘conditions’ limited by the preceding freight reference.[57] Courts have consistently adopted a narrow construction of ‘conditions’ for bills and rejected the interpretation of ‘conditions’ as a synonym for ‘terms’.[58]

The word ‘conditions’ in an incorporation clause will not incorporate clauses that restrict or remove the carrier’s liability.[59] Such clauses operate as exemption clauses and must be expressly incorporated.[60] Thus, in Diederichsen v Farquharson Brothers, [61] the Court held that the charterparty clause exempting the carrier’s liability was not incorporated because the incorporation clause did not refer to ‘exceptions’.[62]

2 Exceptions

‘Exceptions’ refers to ‘provisions which limit the obligation of the shipowner or carrier to deliver the goods safely’.[63] ‘Exceptions’ will not incorporate clauses that extend, rather than limit, the carrier’s liability. Thus, in Hogarth Shipping Co Ltd v Blyth,[64] it was held that a conclusive evidence clause, which extends rather than qualifies liability, was not incorporated by the use of the word ‘exception’ in the incorporation clause.[65]

3 Terms

The wider word ‘terms’ was subsequently added to incorporation clauses.[66] In Fort Shipping Co Ltd v Pederson,[67] the reference to ‘terms’ in the incorporation clause successfully incorporated the conclusive evidence clause. ‘Terms’ has also incorporated an unusual exceptions clause.[68]

Accordingly, general incorporating words referring to all the conditions, exceptions and terms of the charterparty will satisfy the description test for germane charterparty clauses.

B Ancillary clauses

As stated, the description test differs for germane clauses and ancillary clauses. While general words are sufficient to incorporate germane clauses, the same cannot always be said for ancillary clauses. There is no differentiation between arbitration and exclusive jurisdiction clauses for incorporation.[69] A clear intention to incorporate ancillary clauses must be evident.[70] Cases in this area have been contradictory, resulting in uncertainty.[71] Disputes have generally arisen about the use of specific and general words to incorporate ancillary clauses.[72]

1 Specific words of incorporation

Specific words of incorporation will be prima facie effective to incorporate ancillary clauses.[73] Thus, incorporation clauses that expressly refer to the arbitration or exclusive jurisdiction clause will satisfy the description test.[74] The CONGENBILL, a standard form bill of lading, was revised to refer specifically to the charterparty law and arbitration clause in its incorporation clause.[75] This has introduced certainty for parties using the CONGENBILL and the GENCON, which the CONGENBILL is intended to be used with, and can prevent ineffective incorporation of ancillary clauses.[76]

2 General words

General words alone will not incorporate ancillary clauses.[77] In The Siboti, [78] it was held that a clause that sought to incorporate ‘all the terms whatsoever’ was too general to incorporate ancillary clauses.[79]

The more contentious issue in this area is whether the charterparty should be construed where it clearly intends the ancillary clause to apply to bills of lading. The charterparty was suggested to be relevant in the obiter dictum of The Portsmouth.[80] In The Merak, a wide incorporation clause that incorporated ‘all the terms, conditions, clauses and exceptions’ of the charterparty was sufficient to incorporate the arbitration clause because the arbitration clause referred to disputes under the bill of lading.[81] The express reference to the bill in the arbitration clause was a factor for successful incorporation.[82] The Merak noticeably diverged from the requirement for specific words in the incorporation clause.[83]

In The Emmanuel Colocotronis,[84] Staughton J extended the relevance of the charterparty by construing charterparty clauses beyond the clause to be incorporated. A wide incorporation clause was used, but the charterparty arbitration clause did not refer to disputes under the bill. Instead, a charterparty clause outlined the clauses that would be incorporated into the bill, including the arbitration clause.[85] Justice Staughton nonetheless held that the arbitration clause was incorporated. His Honour stated that the charterparty wording, including clauses outside the clause to be incorporated, could determine what clauses will be incorporated provided that the bill directs the holder to the charterparty.[86]

However, this decision has been criticised as being misplaced,[87] and this approach was not followed in subsequent cases.[88] In The Varenna, [89] Hobhouse J stated that in determining incorporation, ‘the primary task of the court is to construe the bill of lading’.[90] Further, in The Federal Bulker,[91] the fact that the charterparty provided for particular clauses to be incorporated into the bills of lading was irrelevant.[92] This is because the agreement to incorporate charterparty clauses must be between the parties to the bill rather than the owner and charterer, and must therefore be contained in the bill.[93] More recently, in The Channel Ranger, the Court rejected the reasoning in the The Merak and held that general words, regardless of their width, will not incorporate ancillary clauses.[94]

As noted by Gross J in The Siboti regarding the incorporation of ancillary clauses, ‘the authorities do not all speak with one voice’.[95] Recent decisions highlight that the bill of lading is the relevant document to construe for incorporation.[96] Courts have moved away from The Merak’s approach, requiring specific words to be used for incorporating ancillary clauses instead. It is thus unnecessary to construe the charterparty, even where a wide incorporation clause is prima facie effective to incorporate the ancillary clause.

IV THE MANIPULATION TEST

For charterparty clauses to be successfully incorporated, the clauses must be capable of being manipulated to make sense in the context of the bill of lading. An appropriately worded incorporation clause can nonetheless fail to incorporate clauses where undue manipulation is required for the charterparty clauses to make sense in the bill of lading context.[97] The parties’ intentions, ascertained from the incorporation clause, is paramount in determining whether manipulation will be permissible.[98] In The Merak, Russell LJ stated:

Clauses which are directly germane to the shipment, carriage and delivery may be incorporated by general words though the fact that they are found in a charter-party may involve a degree of verbal manipulation to fit exactly a bill of lading.[99]

This has been subsequently affirmed.[100] Accordingly, germane clauses can be verbally manipulated to some extent in order to resolve linguistic inapplicability.[101]

However, an exception may arise where manipulation would be contrary to commercial sense because it would impose onerous liabilities on the holder.[102] In The Miramar,[103] a demurrage clause was not manipulated because the liability for demurrage may exceed the goods’ value and was outside the holder’s control. Lord Diplock held:

No business man who had not taken leave of his senses would intentionally enter into a contract which exposed him to a potential liability of this kind; and this, in itself, I find to be an overwhelming reason for not indulging in verbal manipulation of the actual contractual words used in the charter-party.[104]

This approach was accepted in The Spiros C,[105] but has not been expanded to apply to all germane charterparty clauses that impose liability only on the charterer.[106] In ascertaining the parties’ intentions, courts will presume that the parties did not agree to unreasonable terms unless provided for expressly.[107]

Courts have permitted verbal manipulation where the charterparty clause is specifically incorporated in the incorporation clause.[108] In The Nerano, the charterparty arbitration clause, which referred to disputes between the Owners and Charterers, was verbally manipulated to cover disputes with the holder.[109] The Miramar was distinguished on the basis that the parties in The Nerano specifically incorporated the arbitration clause in the bill. The Court also noted that the clause did not impose unusual burdens on the parties.[110]

As such, germane clauses that are prima facie incorporated face a greater challenge in being linguistically applicable in the bill of lading context. This challenge can be avoided by using careful wording in charterparty clauses imposing onerous liabilities.[111] Courts’ willingness to manipulate specifically incorporated clauses,[112] as well as the reasoning in The Miramar,[113] indicates that express reference to onerous charterparty clauses in the incorporation clause will be sufficient to permit verbal manipulation.

V CONSISTENCY TEST

The final hurdle for successful incorporation is the consistency test.[114] Charterparty clauses must be consistent with the express terms of the bill to be incorporated.[115] At the simplest level, charterparty clauses that directly conflict with express bill of lading terms will not be incorporated. Thus, in Gardner v Trechmann,[116] the charterparty freight clause was not incorporated because it stipulated a higher freight rate than the bill of lading. Express bill of lading terms will prevail over charterparty clauses unless the document states otherwise.[117]

Surplus, insensible, or inconsistent provisions will be rejected or ignored.[118] Charterparty clauses will be inconsistent with the bill to the extent that they cannot be reconciled as a matter of language or effect.[119] Courts have demonstrated a readiness to reconcile charterparty clauses with bill of lading terms, and a reluctance to render them inconsistent.[120] In The Nerano,[121] the charterparty arbitration clause was not inconsistent with a bill of lading term providing for English law and jurisdiction to apply because the clauses could be read in conjunction to stipulate English arbitration that is subject to English jurisdiction.[122] Similarly, a freight-prepaid stamp on a bill will not be inconsistent with a charterparty freight clause. The stamp is a representation of fact and the clauses can be reconciled to read that freight is payable as per the charterparty and has been paid.[123] However, in The Constanza M,[124] the charterparty stated that freight would be prepaid while the bill stipulated that freight will be payable by the person taking delivery. The Court held that the two clauses could not be reconciled and the bill of lading term prevailed.[125]

A charterparty clause is not inapplicable merely because the holder has no control over the liability incurred. This is evident from the approach of the courts to loading port demurrage clauses,[126] and The Eems Solar decision.[127] This approach is further strengthened by the Carriage of Goods by Sea Act 1992 (UK), which does not require personal liability for the transfer of liability. [128]

Charterparty clauses imposing total liability for demurrage where the holder’s bill only covers a portion of the cargo may be insensible. In Porteus v Watney[129] (‘Porteus v Watney’) the holder was liable for the entire cargo despite the delay being attributed to the other holders because a daily demurrage rate was incorporated. In The Miramar, however, Lord Diplock stated that Porteus v Watney would be decided differently if tried more recently.[130] It remains unclear whether the position in Porteus v Watney still stands. However, Lord Diplock’s approach makes more commercial sense and would likely be adopted if a similar situation arises again.

A clause will also be insensible where it would defeat the main object and intent of the bill.[131] Cesser clauses have thus been held to be insensible in a bill because it would relieve the holder of all sums due under the bill and defeat the purpose of the incorporation clause.[132]

The consistency test thus protects holders from insensible and inconsistent charterparty clauses.

VI A NOTE ON FORUM NON CONVENIENS

Even where an exclusive jurisdiction clause is successfully incorporated, third parties may not be bound by the clause if it can be set aside for forum non conveniens.[133] Courts will generally give effect to exclusive jurisdiction clauses, and therefore require strong cause for setting aside the exclusive jurisdiction clause.[134] The holder must prove that there is another forum with jurisdiction over the matter and there would be a denial of justice in the designated jurisdiction.[135] The mere fact that the holder has not seen or negotiated the charterparty clause is insufficient to set aside the exclusive jurisdiction clause.[136]

VII CONCLUSION

The incorporation of charterparty clauses into bills of lading continues to be litigated due to their binding effect, once incorporated, on third parties. While the tests for incorporation are well established, inconsistent jurisprudence has obscured the area with uncertainty.[137] What is certain, however, is that in balancing the rights of carriers and cargo interests, English law has adopted a strict approach to incorporation. Charterparty clauses will not be incorporated unless the incorporation clause in the bill of lading is appropriately worded, and the clauses to be incorporated makes sense in the bill and are consistent with the bill’s terms. The incorporation of ancillary clauses proves to be more uncertain and challenging in regards to the incorporation clause’s wording. Parties seeking to bind bill of lading holders to charterparty terms can avoid the minefield of litigation in this field by carefully wording the incorporation clause and charterparty clauses.


[*] BPsych (Hons), LLB (Hons). Collin is a recent law graduate from Murdoch University.

[1] [1774] EngR 102; (1774) 1 Cowp 143, 153.

[2] Federal Bulk Carriers Inc v C Itoh & Co Ltd (‘The Federal Bulker’) [1989] 1 Lloyd’s Rep 103, 105 (Bingham LJ); Caresse Navigation Ltd v Office National de l’Electricité (‘The Channel Ranger’) [2015] QB 366, 376 (Beatson LJ); The Annefield [1971] P 168, 176–7 (Brandon J); Skips A/S Nordheim v Syrian Petroleum Co Ltd (‘The Varenna’) [1984] QB 599, 605 (Hobhouse J).

[3] See Sewell v Burdick (1884) 10 App Cas 74, 105 (Lord Bramwelll); Sze Hai Tong Bank Ltd v Rambler Cycle Co Ltd [1959] AC 576, 586 (Lord Denning).

[4] The Varenna [1984] QB 599, 604 (Hobhouse J); Sir Guenter Treitel and F M B Reynolds, Carver on Bills of Lading (Sweet & Maxwell, 1st ed, 2001) [3-012].

[5] Sea Trade Maritime Corporation v Hellenic Mutual War Risks Association (Bermuda) Ltd [No 2] (‘The Athena’) [2007] 1 Lloyd’s Rep 280, 289 (Langley J); Treitel and Reynolds, above n 4, [3-012].

[6] Thomas & Co Ltd v Portsea SS Co Ltd (‘The Portsmouth’) [1912] AC 1, 6 (Lord Loreburn); The Annefield [1971] P 168, 184 (Lord Denning MR); The Federal Bulker [1989] 1 Lloyd’s Rep 103, 107 (Bingham LJ); The Siboti [2004] 1 CLC 1, 11 (Gross J); The Merak [1965] P 223, 260 (Russell LJ); Simon Allison and Kanga Dharmananda, ‘Incorporation Arbitration Clauses: The Sacrifice of Consistency at the Altar of Experience’ (2014) 30 Arbitration International 265, 268.

[7] OK Petroleum AB v Vitol Energy SA [1995] 2 Lloyd’s Rep 160, 165 (Colman J); The Pioneer Container (‘The KH Enterprise’) [1994] UKPC 5; [1994] 2 AC 324, 346 (Lord Goff); Anonymous Greek Co of General Insurances ‘The Ethniki’ v AIG Europe (UK) [2000] CLC 446, 453 (Evans LJ).

[8] See The Varenna [1984] QB 599, 608 (Hobhouse J); The Portsmouth [1912] AC 1, 9 (Lord Gorell). See also Heyman v Darwins Ltd [1942] AC 356.

[9] Sir Richard Aikens, Richard Lord and Michael Bools, Bills of Lading (Informa Law, 2006) [7.83]; Nicholas Gaskell, Regina Asariotis and Yvonne Baatz, Bills of Lading: Law and Contracts (LLP Professional Publishing, 2000) [21.22]. Note that this article will not address the preliminary issue of what law governs the incorporation of charterparty clauses into bills of lading. The tests for incorporation differs between jurisdictions, but this article will only examine the English legal position.

[10] Melis Özdel, ‘Incorporation of Charterparty Clauses into Bills of Lading: Peculiar to Maritime Law?’ in Malcolm Clarke (eds), Maritime Law Evolving (Hart Publishing, 2013) 181, 183–4.

[11] Garbis Maritime Corporation v Philippine National Oil Co (‘The Garbis’) [1982] 2 Lloyd’s Rep 283, 288 (Goff J); Julian Cooke et al, Voyage Charters (Informa Law, 3rd ed, 2007) [18.60].

[12] K/S A/S Seateam & Co v Iraq National Oil Co (‘The Sevonia Team’) [1983] 2 Lloyd’s Rep 640, 644 (Lloyd J). Cf Smidt v Tiden (1874) LR 9 QB 446 where the contract was void for mistake as the charterparty to be incorporated could not be determined. See Pacific Molasses Co v Entre Rios Compania Naviera SA (‘The San Nicholas’) [1976] 1 Lloyd’s Rep 8, 11 (Lord Denning MR); The Garbis [1982] 2 Lloyd’s Rep 283, 288 (Goff J); Orinoco Navigation Ltd v Ecotrade SpA (‘The Ikariada’) [1999] CLC 1713, 1723 (Cresswell J); Miriam Goldby, ‘Incorporation of Charterparty Arbitration Clause into Bills of Lading: Recent Developments’ (2007) 19 Denning Law Journal 171, 177.

[13] The San Nicholas [1976] 1 Lloyd’s Rep 8, 11 (Lord Denning MR).

[14] Ibid; The Garbis [1982] 2 Lloyd’s Rep 283, 287 (Goff J); The Ikariada [1999] CLC 1713, 1723 (Cresswell J); Bangladesh Chemical Industries Corporation v Henry Stephens Shipping Co Ltd (‘The SLS Everest’) [1981] 2 Lloyd’s Rep 389, 391–2 (Lord Denning MR).

[15] The Siboti [2004] 1 CLC 1, 9 (Gross J); The Varenna [1984] QB 599, 616 (Sir Donaldson MR), 619 (Oliver LJ). See also Manchester Trust v Furness [1895] 2 QB 539, 545 (Lindley LJ) where Lindley LJ noted that the courts have always rejected the notion of constructive notice for negotiable contracts. Cf National Navigation Co v Endesa Generacion SA [2009] 1 Lloyd’s Rep 666, 697 (Gloster J), revd [2010] 1 Lloyd’s Rep 193; and the US position where the holder’s knowledge of the charterparty the bill of lading seeks to incorporate will lead to incorporation: Amoco Overseas Co v ST Avenger, 387 F Supp 589 (D NY, 1975).

[16] The Siboti [2004] 1 CLC 1, 9 (Gross J); The Varenna [1984] QB 599, 616 (Sir Donaldson MR), 619 (Oliver LJ).

[17] The San Nicholas [1976] 1 Lloyd’s Rep 8, 11 (Lord Denning MR); Navigazione Alta Italia SpA v Svenska Petroleum AB (‘Nai Matteini’) [1988] 1 Lloyd’s Rep 452, 459 (Gatehouse J); Cooke et al, above n 11, [18.61].

[18] Aikens, Lord and Bools, above n 9, [7.104]. See also The San Nicholas [1976] 1 Lloyd’s Rep 8, 11 (Lord Denning MR).

[19] Melis Özdel, Bills of Lading Incorporating Charterparties (Hart Publishing, 2015) 55. See also Compania Comercial Y Naviera San Martin SA v China National Foreign Trade Transportation Corporation [1980] 1 Lloyd’s Rep 505, 514 (Lloyd J), affd (‘The Constanza M’) [1981] 2 Lloyd’s Rep 147.

[20] Özdel, Bills of Lading Incorporating Charterparties, above n 19, 55. See Partenreederei M/S ‘Heidberg’ v Grosvenor Grain and Feed Co Ltd (‘The Heidberg’) [1994] 2 Lloyd’s Rep 287.

[21] See Mitsubishi Corporation v Eastwind Transport Ltd (‘The Irbenskiy Proliv’) [2005] 1 Lloyd’s Rep 383, 387–8 (Glick J) where the contra proferentem rule was not applied because it would undermine the commercial purpose.

[22] Özdel, Bills of Lading Incorporating Charterparties, above n 19, 55–6.

[23] The SLS Everest [1981] 2 Lloyd’s Rep 389, 392 (Lord Denning MR); Cooke et al, above n 11, [18.61].

[24] Aikens, Lord and Bools, above n 9, [7.105].

[25] See Lignell v Samuelson (1921) 9 Ll L Rep 361.

[26] Özdel, Bills of Lading Incorporating Charterparties, above n 19, 50–2.

[27] Quark Ltd v Chiquita Unifrutti Japan Ltd (2005) 677 LMLN 1 (‘The Vinson’).

[28] Ibid (Smith J) where the bill sought to incorporate the charterparty arbitration and choice of law clauses, which were only contained in the sub-charter.

[29] Ibid.

[30] Ibid; Özdel, Bills of Lading Incorporating Charterparties, above n 19, 52.

[31] The Heidberg [1994] 2 Lloyd’s Rep 287, 310 (Diamond J). There are formal requirements for enforcement of arbitration and exclusive jurisdiction clauses on third parties that differ from the formal requirements for incorporation. These formal requirements will not be discussed in this article. For a detailed discussion see Özdel, Bills of Lading Incorporating Charterparties, above n 19, 60–9. See also Arbitration Act 1996 (UK) s 5.

[32] Cooke et al, above n 11, [18.64].

[33] See, eg, Leduc v Ward (1888) 20 QB 475; The Ardennes [1951] 1 KB 55.

[34] Welex AG v Rosa Maritime Ltd (The Epsilon Rosa) [2003] 2 Lloyd’s Rep 509, [28] (Tuckey LJ).

[35] The Heidberg [1994] 2 Lloyd’s Rep 287.

[36] Ibid 312 (Diamond J).

[37] Ibid 310–11 (Diamond J).

[38] Özdel, Bills of Lading Incorporating Charterparties, above n 19, 54–5. See also Tradigrain SA v King Diamond Shipping SA (‘The Spiros C’) [2000] 2 Lloyd’s Rep 319, 327 (Rix LJ) where discussion as to the correctness of The Heidberg was left open-ended.

[39] Ceval Alimentos SA v Agrimpex Trading Co Ltd [No 2] (‘The Northern Progress’) [1996] 2 Lloyd’s Rep 319, but Rix J noted that it is more typical for sale contracts to envisage a future contract.

[40] Ibid 326–7 (Rix J).

[41] Ibid 326 (Rix J). See, eg, OK Petroleum AB v Vitol Energy SA [1995] 2 Lloyd’s Rep 160.

[42] OK Petroleum AB v Vitol Energy SA [1995] 2 Lloyd’s Rep 160, 163 (Colman J); Özdel, Bills of Lading Incorporating Charterparties, above n 19, 74.

[43] Welex AG v Rosa Maritime Ltd (‘The Epsilon Rosa’) [2002] 2 Lloyd’s Rep 81, affd [2003] 2 Lloyd’s Rep 509.

[44] Ibid; The Channel Ranger [2015] QB 366; Cooke et al, above n 11, [18.64].

[45] Gaskell, Asariotis and Baatz, above n 9, [21.22]; Stewart Boyd, Andrew Burrows and David Foxton, Scrutton on Charterparties and Bills of Lading (Sweet & Maxwell, 20th ed, 1996), 75.

[46] The Federal Bulker [1989] 1 Lloyd’s Rep 103, 106 (Bingham LJ), 110 (Dillon LJ); The Siboti [2004] 1 CLC 1, 9 (Gross J).

[47] The Varenna [1984] QB 599, 605 (Hobhouse J); The Annefield [1971] P 168, 183 (Lord Denning MR); Excess Insurance Co Ltd v Mander [1997] 2 Lloyd’s Rep 119, 124 (Colman J).

[48] The Siboti [2004] 1 CLC 1, 9 (Gross J). See The Merak [1965] P 223 where it was irrelevant that the holder was a party to the charter and thus had notice of the clauses to be incorporated.

[49] The Siboti [2004] 1 CLC 1, 9 (Gross J); The Portsmouth [1912] AC 1, 10 (Lord Robson).

[50] The Portsmouth [1912] AC 1, 6 (Lord Atkinson); The Annefield [1971] P 168, 184 (Lord Denning MR); Boyd, Burrows and Foxton, above n 44, 75.

[51] India Steamship Co v Louis Dreyfus Sugar Ltd (‘The Indian Reliance’) [1997] 1 Lloyd’s Rep 52, 58 (Rix J); Martin Dockray, Cases & Materials on the Carriage of Goods by Sea (Taylor & Francis Ltd, 3rd ed, 2004) 87.

[52] See Smith v Sieveking [1855] EngR 400; (1855) 119 ER 352; Chappel v Comfort [1861] EngR 633; (1861) 142 ER 669.

[53] Boyd, Burrows and Foxton, above n 45, 79.

[54] Ibid. See, eg, Russell v Niemann [1864] EngR 610; (1864) 17 CBNS 163.

[55] Cooke et al, above n 11, [18.52]. See, eg, Porteus v Watney (1878) 5 QBD 534; Kish v Taylow [1912] AC 604.

[56] The Varenna [1984] QB 599, 605 (Hobhouse J), 617 (Sir Donaldson MR); Serraino v Campbell [1891] 1 QB 283.

[57] See The Varenna [1984] QB 599, 606 (Hobhouse J).

[58] Ibid 607 (Hobhouse J).

[59] Serraino v Campbell [1891] 1 QB 283, 296–7 (Kay LJ). See The Varenna [1984] QB 599, 607–9 (Hobhouse J).

[60] Boyd, Burrows and Foxton, above n 45, 78–9.

[61] [1898] 1 QB 150.

[62] Ibid 163 (Collins LJ).

[63] Hogarth Shipping Company Ltd v Blyth, Greene, Jourdain & Co Ltd [1917] 2 KB 534, 548 (Swinfen Eady LJ).

[64] [1917] 2 KB 534.

[65] Ibid 548, 552 (Swinfen Eady LJ).

[66] Özdel, Bills of Lading Incorporating Charterparties, above n 19, 96.

[67] [1924] 19 Ll L Rep 26.

[68] The Garbis [1982] 2 Lloyd’s Rep 283.

[69] The Siboti [2004] 1 CLC 1, 11 (Gross J).

[70] The Varenna [1984] QB 599, 604 (Hobhouse J).

[71] See The Varenna [1984] QB 599. Cf The Merak [1965] P 223. See also The Siboti [2004] 1 CLC 1, 10 (Gross J).

[72] The Annefield [1971] P 168, 173 (Brandon J), 184 (Lord Denning MR); Astro Valiente Compania Naviera SA v The Government of Pakistan Ministry of Food and Agriculture [No 2] (‘The Emmanuel Colocotronis’) [1982] 1 Lloyd’s Rep 286, 292 (Staughton J); Boyd, Burrows and Foxton, above n 45, 80. Cf The Channel Ranger [2015] QB 366, [38]–[39] (Beatson LJ).

[73] The Federal Bulker [1989] 1 Lloyd’s Rep 103, 109 (Bingham LJ); The Rena K [1979] QB 377, 390–1 (Brandon J); The Delos [2001] 1 Lloyd’s Rep 703, 705 (Langley J); Boyd, Burrows and Foxton, above n 45, 75.

[74] The Annefield [1971] P 168, 186 (Lord Denning MR); The Federal Bulker [1989] 1 Lloyd’s Rep 103, 108 (Bingham LJ); Boyd, Burrows and Foxton, above n 45, 79.

[75] Goldby, above n 12, 175; BIMCO, CONGENBILL 2007 (16 November 2007) 2, which states ‘All terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf, including the Law and Arbitration Clause/Dispute Resolution Clause, are herewith incorporated’.

[76] For cases involving the CONGENBILL see The Epsilon Rosa [2003] 2 Lloyd’s Rep 509, 515 (Tuckey LJ); The Delos [2001] 1 Lloyd’s Rep 703, 705 (Langley J); The Vinson (2005) 677 LMLN 1 (Smith J). For a further discussion see Goldby, above n 12, 175–9.

[77] The Portsmouth [1912] AC 1; The Federal Bulker [1989] 1 Lloyd’s Rep 103, 107 (Bingham LJ); The Annefield [1971] P 168, 173 (Brandon J); Ian Gaunt, ‘Incorporation of Arbitration Clauses in Bills of Lading: The Saga Continues’ (Paper presented at International Congress of Maritime Arbitrators XIX, Hong Kong, 11 May 2015) 15.

[78] [2004] 1 CLC 1.

[79] Ibid 18 (Gross J).

[80] [1912] AC 1.

[81] [1965] P 223, 249–50 (Sellers LJ), 254 (Davies LJ); 259–60 (Russell LJ).

[82] Ibid. See also David Martin-Clark, ‘Incorporation of Charterparty Clauses into Bills of Lading The Ebb and Flow in English Law over the last 100 Years’ (Paper presented at International Congress of Maritime Arbitrators XV, London, 22 March 2004) 10.

[83] See The Annefield [1971] P 168, 186 (Phillimore LJ) where The Merak was described as ‘un unusual case’. See also The Federal Bulker [1989] 1 Lloyd’s Rep 103, 108 (Bingham LJ); The Channel Ranger [2015] QB 366, [38]–[39] (Beatson LJ).

[84] [1982] 1 Lloyd’s Rep 286.

[85] Ibid 288 (Staughton J).

[86] Ibid 293 (Staughton J).

[87] See Özdel, Bills of Lading Incorporating Charterparties, above n 19, 132.

[88] See The Federal Bulker [1989] 1 Lloyd’s Rep 103, 107–8 (Bingham LJ); The Siboti [2004] 1 CLC 1, 10–11 (Gross J); The Varenna [1984] QB 599, 608–9 (Hobhouse J).

[89] [1984] QB 599.

[90] Ibid 604 (Hobhouse J).

[91] [1989] 1 Lloyd’s Rep 103.

[92] Ibid 110–11 (Dillon LJ).

[93] The Varenna [1984] QB 599, 615–6 (Sir Donaldson MR). See The Federal Bulker [1989] 1 Lloyd’s Rep 103, 105 (Bingham LJ); Cooke et al, above n 11, [18.49].

[94] The Channel Ranger [2015] QB 366, [38]–[39] (Beatson LJ).

[95] The Siboti [2004] 1 CLC 1, [29] (Gross J). See also Martin-Clarke, above n 79, 10; Aikens, Lord and Bools, above n 9, [7.99].

[96] See The Varenna [1984] QB 599; The Federal Bulker [1989] 1 Lloyd’s Rep 103; The Siboti [2004] 1 CLC 1.

[97] The Northern Progress [1996] 2 Lloyd’s Rep 319, 329 (Rix J); Cooke et al, above n 11, [18.54].

[98] The Siboti [2004] 1 CLC 1, 9–10 (Gross J); The Northern Progress [1996] 2 Lloyd’s Rep 319, 329 (Rix J); Daval Aciers D’Usinor Et De Sacilor v Armare SRL (‘The Nerano’) [1996] 1 Lloyd’s Rep 1, 3–4 (Saville LJ); Cooke et al, above n 11, [18.51].

[99] [1965] P 223, 260 (Russell LJ).

[100] The Siboti [2004] 1 CLC 1; The Annefield [1971] P 168; Yuzhny Zavod Metall Profil LLC v Eems Beheerder BV (‘The Eems Solar’) [2013] 2 Lloyd’s Rep 487.

[101] The Annefield [1971] P 168, 184 (Lord Denning MR); The Merak [1965] P 223, 259–60 (Russell LJ); Cooke et al, above n 11, [18.55].

[102] Özdel, Bills of Lading Incorporating Charterparties, above n 19, 123. See Haba Sinai Ve Tibbi Gazlarsthisal Endustri A v Sometal AL [2010] EWHC 29 (Comm), [47].

[103] Miramar Maritime Corporation v Holborn Oil Trading Ltd (‘The Miramar’) [1984] AC 676.

[104] Ibid 685 (Lord Diplock).

[105] [2000] 2 Lloyd’s Rep 319, 332–3 (Rix LJ). However, note that Rix LJ ultimately did not decide on the point.

[106] See, eg, The Constanza M [1981] 2 Lloyd’s Rep 147, 152 (Fox LJ). For further discussion, see Özdel, Bills of Lading Incorporating Charterparties, above n 19, 123–4.

[107] See Homburg Houtimport BV v Agrosin Private Ltd (‘The Starsin’) [2003] UKHL 12; [2004] 1 AC 715, 779 (Lord Hobhouse).

[108] The Siboti [2004] 1 CLC 1, 9–10 (Gross J); The Nerano [1996] 1 Lloyd’s Rep 1, 4 (Saville LJ); The Rena K [1979] QB 377, 390–1 (Brandon J); The Delos [2001] 1 Lloyd’s Rep 703, 705 (Langley J).

[109] The Nerano [1996] 1 Lloyd’s Rep 1, 4 (Saville LJ).

[110] Ibid. See also The Delos [2001] 1 Lloyd’s Rep 703, 705 (Langley J).

[111] Özdel, Bills of Lading Incorporating Charterparties, above n 19, 125.

[112] See The Siboti [2004] 1 CLC 1, 9–10 (Gross J); The Nerano [1996] 1 Lloyd’s Rep 1, 4 (Saville LJ); The Rena K [1979] QB 377, 390–1 (Brandon J).

[113] See The Miramar [1984] AC 676, 685 (Lord Diplock).

[114] Özdel, Bills of Lading Incorporating Charterparties, above n 19, 184; Goldby, above n 12, 172.

[115] Gullischen v Stewart Brothers (1884) 13 QBD 317, 318 (Lord Coleridge CJ); Boyd, Burrows and Foxton, above n 45, 76; Cooke et al, above n 11, [18.58]; Liang Zhao and Felix W H Chan, ‘Incorporating the Charterparty’s Applicable Law Clause into Bills of Lading’ [2012] Lloyd’s Maritime and Commercial Law Quarterly 482, 484.

[116] (1884) 15 QBD 154.

[117] The Constanza M [1981] 2 Lloyd’s Rep 147, 151 (Lord Denning MR); The Merak [1965] P 223, 230–1 (Scarman J); The Varenna [1984] QB 599, 616 (Sir Donaldson MR); Özdel, Bills of Lading Incorporating Charterparties, above n 19, 158.

[118] The Varenna [1984] QB 599, 616 (Sir Donaldson MR).

[119] Bayoil SA v Seawin Tankers Corporation (‘The Leonidas’) [2001] 1 Lloyd’s Rep 533, 536 (Langley J); Treitel and Reynolds, above n 4, [3-020].

[120] See, eg, The Nerano [1996] 1 Lloyd’s Rep 1; The Indian Reliance [1997] 1 Lloyd’s Rep 52; Federal Commerce & Navigation Co Ltd Molena Alpha Inc (‘The Nanfri’) [1979] AC 757.

[121] [1996] 1 Lloyd’s Rep 1.

[122] Ibid 5 (Saville LJ). See also The Nerano [1994] 2 Lloyd’s Rep 50, 55 (Clarke J) where Clarke J stated that the clauses overlapped but were not inconsistent because English courts would retain a supervisory jurisdiction over the arbitration.

[123] The Nanfri [1979] AC 757, 781–2 (Lord Fraser); The Indian Reliance [1997] 1 Lloyd’s Rep 52, 55 (Rix J).

[124] [1981] 2 Lloyd’s Rep 147.

[125] Ibid 150–1 (Lord Denning MR).

[126] See, eg, Gray v Carr (1871) LR 6 QB 522.

[127] The Eems Solar [2013] 2 Lloyd’s Rep 487 where a clause excluding the charterers’ liabilities for stowage was incorporated despite the holder having no control over stowage operations.

[128] See s 3(1) which provides that where a holder who takes a step to enforce the contract of carriage will be subject to the same liabilities as if he was an original party to the contract.

[129] (1878) 5 QBD 534.

[130] [1984] AC 676, 686.

[131] See Gullischen v Stewart Brothers (1884) 13 QBD 317, 319 (Bowen LJ). See also Glynn v Margetson [1893] AC 351, 354–5 (Lord Herschell).

[132] Gullischen v Stewart Brothers (1884) 13 QBD 317, 319 (Bowen LJ); Clink v Radford [1891] 1 QB 625, 627 (Lord Esher MR). Cf Treitel and Reynolds, above n 4, [3-035]–[3-038].

[133] MF Sturley, ‘Bill of Lading Choice of Forum Clauses: Comparisons between United States and English Law’ [1992] Lloyd’s Maritime and Commercial Law Quarterly 248, 258. See Navig8 Pte Ltd v Al-Riyadh Co for Vegetable Oil Industry (‘The Lucky Lady’) [2013] 2 Lloyd’s Rep 104, 113 (Smith J). See also The Hollandia [1983] 1 AC 565 where Protocol to Amend the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading, opened for signature 21 December 1979, 1412 UNTS 127 (entered into force 14 February 1984) (‘The Hague-Visby Rules’) art III(8) was applied to invalidate an exclusive jurisdiction clause.

[134] Jewel Owner Ltd v Sagaan Developments Trading Ltd [2012] 2 Lloyd’s Rep 672, 676 (Popplewell J); Donohue v Armco Inc [2002] CLC 440, [24] (Lord Bingham).

[135] The Eleftheria [1970] P 94, 99–100 (Brandon J); The Abidin Daver [1984] AC 398, 411–12 (Lord Diplock); Galaxy Special Maritime Enterprise v Prima Ceylon Ltd (‘The Olympic Galaxy’) [2006] 2 Lloyd’s Rep 27, 33 (Longmore LJ); John Burke, ‘Foreclosure of the Doctrine of Forum Non Conveniens under the Brussels I Regulation: Advantages and Disadvantages’ (2008) The European Legal Forum 121, 122.

[136] See The KH Enterprise [1994] UKPC 5; [1994] 2 AC 324.

[137] For a similar view see Gaskell, Asariotis and Baatz, above n 9, [21.20].


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